Rite Aid 2013 Annual Report Download - page 17

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experience loss of critical data and interruptions or delays in our ability to perform critical functions,
which could adversely affect our business and results of operations. Any compromise of our security
could also result in a violation of applicable privacy and other laws, significant legal and financial
exposure, damage to our reputation, loss or misuse of the information and a loss of confidence in our
security measures, which could harm our business.
Risks Related to our Industry
The markets in which we operate are very competitive and further increases in competition could adversely
affect us.
We face intense competition with local, regional and national companies, including other drugstore
chains, independently owned drugstores, supermarkets, mass merchandisers, dollar stores and internet
pharmacies. Competition from discount stores has significantly increased during the past few years. Our
industry also faces growing competition from companies who import drugs directly from other
countries, such as Canada, as well as from large-scale retailers that offer generic drugs at a substantial
discount. Some of our competitors have or may merge with or acquire pharmaceutical services
companies, pharmacy benefit managers or mail order facilities, which may further increase competition.
We may not be able to effectively compete against them because our existing or potential competitors
may have financial and other resources that are superior to ours. In addition, we may be at a
competitive disadvantage because we are more highly leveraged than our competitors. The ability of
our stores to achieve profitability depends on their ability to achieve a critical mass of loyal, repeat
customers. We believe that the continued consolidation of the drugstore industry will further increase
competitive pressures in the industry. We cannot assure you that we will be able to continue to
effectively compete in our markets or increase our sales volume in response to further increased
competition.
Consolidation in the healthcare industry could adversely affect our business, financial condition and results of
operations.
Many organizations in the healthcare industry, including pharmacy benefit managers, have
consolidated or are in the process of consolidating, such as the merger of Express Scripts and Medco
Health Solutions, to create larger healthcare enterprises with greater market power, which has resulted
in greater pricing pressures. If this consolidation trend continues, it could give the resulting enterprises
even greater bargaining power, which may lead to further pressure on the prices for our products and
services. If these pressures result in reductions in our prices, our business will become less profitable
unless we are able to achieve corresponding reductions in costs or develop profitable new revenue
streams. We expect that market demand, government regulation, third-party reimbursement policies,
government contracting requirements, and societal pressures will continue to cause the healthcare
industry to evolve, potentially resulting in further business consolidations and alliances among the
industry participants we engage with, which may adversely impact our business, financial condition and
results of operations.
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