Rite Aid 2016 Annual Report Download - page 25

brands. Failure to timely identify or effectively respond to changing consumer preferences and spending
patterns, an inability to expand the products being purchased by our clients and customers, or the
failure or inability to obtain or offer particular categories of products could negatively affect our
relationship with our clients and customers and the demand for our products and services.
We offer our customers private label brand products that are available exclusively at our stores and
through our online retail sites. The sale of private label products subjects us to unique risks including
potential product liability risks and mandatory or voluntary product recalls, our ability to successfully
protect our intellectual property rights and the rights of applicable third parties, and other risks
generally encountered by entities that source, market and sell private-label products. Any failure to
adequately address some or all of these risks could have an adverse effect on our business, results of
operations and financial condition. Additionally, an increase in the sales of our private label brands
may negatively affect our sales of products owned by our suppliers which, consequently, could adversely
impact certain of our supplier relationships. Our ability to locate qualified, economically stable
suppliers who satisfy our requirements, and to acquire sufficient products in a timely and effective
manner, is critical to ensuring, among other things, that customer confidence is not diminished. Any
failure to develop sourcing relationships with a broad and deep supplier base could adversely affect our
financial performance and erode customer loyalty.
Moreover, customer expectations and new technology advances from our competitors have
required that our business evolve so that we are able to interface with our retail customers not only
face-to-face in our stores but also online and via mobile and social media. Our customers are using
computers, tablets, mobile phones and other electronic devices to shop in our stores and online, as well
as to provide public reactions concerning each facet of our operation. If we fail to keep pace with
dynamic customer expectations and new technology developments, our ability to compete and maintain
customer loyalty could be adversely affected.
Finally, EnvisionRx’s specialty pharmacy business focuses on complex and high-cost medications
that serve a relatively limited universe of patients. As a result, the future growth of our specialty
pharmacy business is dependent largely upon expanding our base of drugs or penetration in certain
treatment categories. Any contraction of our base of patients or reduction in demand for the
prescriptions we currently dispense could have an adverse effect on our business, financial condition
and results of operations.
Risks Related to the Proposed WBA Merger
The Merger with WBA is subject to closing conditions, including governmental and regulatory approvals as
well as other uncertainties and there can be no assurances as to whether and when it may be completed.
Failure to complete the Merger could negatively impact our stock price, future business and financial results.
There can be no assurance that the proposed Merger with WBA will occur. On February 4, 2016,
the proposal to adopt the Merger was approved by holders of approximately 74% of our outstanding
common stock entitled to vote as of the record date. However, completion of the Merger is subject to
certain conditions, including, among others, (i) the absence of any order or law prohibiting the Merger;
(ii) the expiration or earlier termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended; (iii) the accuracy of the parties’ respective representations and
warranties, subject in some instances to materiality or ‘‘Material Adverse Effect’’ qualifiers, as of the
date of the Merger Agreement and the closing date of the Merger; (iv) the parties’ respective
performance in all material respects (or, with respect to Rite Aid’s specified obligations relating to
incurring indebtedness, in all respects) of their respective agreements and covenants contained in the
Merger Agreement at or prior to the closing of the Merger; and (v) the absence of a ‘‘Material
Adverse Effect’’ with respect to us, since the execution of and as defined in the Merger Agreement,
including the absence of any event, development, circumstance, change, effect, condition or occurrence
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