Rite Aid founder retires from daily operations

April 22, 1994|By Jay Hancock | Jay Hancock,Sun Staff Writer

Alex Grass, who built Rite Aid Corp. from a small soap and medicine wholesaler into the country's biggest drugstore chain, will step aside from day-to-day operations next year but continue as chairman, the company said yesterday.

Mr. Grass will resign as chief executive officer in March 1995, assuming "a less intense schedule," Rite Aid said. The CEO job will pass to his son, Martin, who lives in Baltimore County and has been groomed for years to succeed his father.

The announcement wasn't a surprise. Alex Grass is 66, and Martin, 40, has long been expected to take over the $4 billion chain. Rite Aid is based in Camp Hill, Pa.

"I don't expect the change to have any significant effect on the company," said Michael L. Mead, who follows Rite Aid's stock for Baltimore investment firm Legg Mason Wood Walker Inc.

Industry experts said Martin Grass, who has been chief operating officer and president of Rite Aid for five years, faced a major challenge as CEO in fighting mail-order pharmaceutical retailers, which are taking large chunks of business from Rite Aid and other traditional drugstores.

He is taking over at a time when Rite Aid is retrenching, closing 200 unprofitable stores, selling four subsidiaries and focusing on its drugstore operations. In January, the company said it would seek buyers for Encore Books; ADAP, an auto parts chain; Concord Custom Cleaners and Sera Tec Biologicals. The divisions are still for sale.

In taking over as chief executive, Martin Grass will control the state's largest drugstore chain with 188 stores. The company runs a total of 2,690 drugstores, mainly in the eastern half of the country.

Martin Grass' connection to the Baltimore area was strengthened two years ago when he bought a Baltimore County house for $1.55 million. He also serves on the board of the Baltimore Symphony Orchestra.

Rite Aid remains profitable, with operating earnings of $116.8 million for the year ended Feb. 26. But it has struggled with a weak economy and growing competition from big, warehouse pharmacies hired by insurance companies to mail prescriptions directly to patients.

The pressure has shown in Rite Aid's revenue. Once, sales at a typical Rite Aid store grew 6 percent or more each year. Lately the increase has been less than 3 percent.

One-time costs of $149.2 million, associated with closing poorly performing stores, hurt Rite Aid's net earnings for its most recent fiscal year. Net profit was $9.3 million for the year ended Feb. 26 on sales of $4.06 billion.

Alex Grass started Rite Aid with one drugstore in 1962.

He also is chairman, CEO and a major shareholder in Super Rite Foods Inc., which has 23 Metro and Basics supermarkets in the Baltimore area. Mr. Grass's Super Rite duties won't change, said Peter Vander Veen, the company's president.

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