After months of pandemic-related financial strain and years of uncertainty over its future, Bartell Drugs, one of the oldest companies in Washington state and one of the most familiar names in the Seattle business community, is being sold.
The 67-store regional drugstore chain, which has been owned by the Bartell family since its founding in Seattle’s Central District in 1890, will be acquired by Rite Aid for $95 million, the companies announced Wednesday.
“We felt that this was the only answer,” said George D. Bartell, chairman of the firm his grandfather, George H. Bartell Sr., started. “It was getting more difficult for regional operators to compete in the market.”
That bleak assessment may help explain the sale price, which one retail analyst said was “on the low side.”
Pennsylvania-based Rite Aid, which has about 2,400 stores in 18 states, including 69 in and around Seattle, said the Bartell name will remain on the stores. Heyward Donigan, Rite Aid’s president and CEO, said there were no plans to close locations or lay off any of Bartell’s roughly 1,600 retail staff, and that Bartell’s 70 or so corporate employees, including CEO Kathi Lentzsch, would “be carefully and equally vetted” for positions in the merged organization. The sale is expected to close in December, pending approval by regulators.
Bartell’s focus on local markets and its presence across so many neighborhoods was a big part of the attraction, Donigan said.
“That’s kind of who we want to be, more and more, is your local neighborhood pharmacy,” said Donigan, adding that Bartell has done well in reaching crucial demographic groups, including young, middle-income mothers. “Together, this is going to be a terrific combination.”
Some customers were unhappy with the news, which they found hard to square with the in-store banners celebrating the company’s 130th anniversary.
“No!” exclaimed Seattle resident and longtime customer Dianne Cubell, 81, when she heard the news outside the Bartell Drugs on upper Queen Anne. “I trust this store.”
“This is so crushing,” added Seattle resident Janice Brookshire in an email to The Seattle Times. “Yet another local business lost.”
The privately held company, which shares little financial data, had shown no obvious signs of financial trouble. Despite the recent closure of a downtown location, reportedly after heavy theft losses, Bartell had opened a new store in Belltown last year, when it had $550 million in sales.
But even before the pandemic cut into its revenue, Bartell Drugs had faced rising questions about its long-term prospects. Since the Great Recession especially, the drugstore industry has seen thinning profits, a steady loss of sales to Amazon and other online retailers, and falling insurance company reimbursements for prescription drugs.
Those trends increasingly have favored national chains like Walgreens and CVS, which can use their scale to cut costs, and led many regional players to be acquired by larger rivals.
Even Rite Aid, which has barely a quarter of CVS’ nearly 10,000 locations, has struggled. It has seen significant losses since 2018 and its share price is down more than 95% since 2017, when it failed to sell itself to Walgreens (which later bought nearly 2,000 Rite Aid locations). Rite Aid’s share price closed Wednesday at $10.31, up 6.6%.
“It’s not a good thing to be small within the drugstore segment,” said Neil Saunders, a retail analyst and managing director at GlobalData. That vulnerability is “what they’re trying to remedy now.”
Bartell Drugs itself began with an acquisition. It was started in 1890, barely a year after Washington became a state, when a 21-year-old pharmacist from Kansas named George H. Bartell purchased the Lake Washington Pharmacy on South Jackson Street.
In a booming city crowded with competitors, Bartell focused on customer service, cleanliness and innovative products — it was an early adopter of gelatin capsules and later had an extensive photo processing lab. By the mid-1950s, under the management of Bartell’s son, George H. Bartell Jr., the chain had nearly two dozen locations.
There were setbacks. By the late 1950s, Seattle’s booming suburbs were challenging a business strategy built around “everybody shopping downtown in smaller stores,” George Bartell recalled. The Bartell fleet fell by roughly half, while Seattle-based rival Pay ‘n Save was rising as “the big dog” in the business, Bartell said.
By the early 1970s, the Bartell chain had resumed its expansion, albeit cautiously. The family stuck to its focus on customer service and a merchandise mix that played up local products, such as Almond Roca from Tacoma-based Brown & Haley and Applets & Cotlets from Liberty Orchards in Cashmere, Chelan County.
It also remained tightly focused on the local market, where it could count on a relatively wealthy and educated customer base, George Bartell said. “I’m not so sure our model would have translated very good” elsewhere, he said.
Even as Pay ‘n Save was eventually bought (by a company that was later sold to Rite Aid), Bartell solidified its position as the dominant locally owned drugstore. Today, its 67 locations are in King, Snohomish and Pierce counties.
In 2015, George D. Bartell stepped down from the CEO role, and former REI executive Brian Unmacht became the first outsider to hold that title. Unmacht resigned in 2017 and was followed by Lentzsch, in 2018, who came from a long career in retail, including stints at Macy’s and Pottery Barn.
Well before then, however, Bartell Drugs was feeling pressure from online competition, falling insurance reimbursement rates and other changes. In the aftermath of the Great Recession, the family knew “we had to make a substantial improvement if there was going to be a good future for us,” George Bartell said.
Even before the pandemic, prospects “for hanging on” were growing worse, he added. “The pandemic just made it look impossible.”
George Bartell said the family owners — he and his sister, Jean (Bartell) Barber, their spouses and five children — have been long willing to endure “lean times” to keep the company in the family. “But there’s a limit,” Bartell added. “You’ve got to keep reexamining and say, ‘What’s reasonable? What are our options?’ And we’ve been there.”
Saunders, the analyst, said the deal makes sense for both Bartell Drugs and Rite Aid. But given the degree of competition, “the question is, is Rite Aid in a position to survive that?”
That uncertainty, Saunders added, may help explain the price Rite Aid paid for Bartell. “It is low, and I think it reflects, probably, the positions of the various players within the market and the prospects for them going forward,” Saunders said.
George Bartell, whose first job at the family firm — recording inventory — came at age 12, made no effort to hide his sadness at selling a business that has served Seattle-area customers for generations. “I feel like I’m letting them down,” he said.
But George Bartell also felt the family had struck a deal that, by protecting the Bartell name, would preserve customers’ experience “to a better degree than probably any other option might have.”