Shopko pharmacy to close, store spared

Company files for Chapter 11 bankruptcy protection


The Powell Shopko is going to lose its pharmacy, as the store’s corporate owners announced Wednesday that the chain is getting out of the pharmacy business.

However, Powell’s Shopko Hometown store itself is set to remain open — unlike dozens of Shopko locations that the company is planning to shutter across the U.S.

The changes are part of a restructuring plan that Shopko leaders hope to quickly put into place to deal with hundreds of millions of dollars in debt. The Green Bay, Wisconsin-based company filed for Chapter 11 bankruptcy protections Wednesday morning, generally citing poor sales numbers.

As part of its efforts to improve its balance sheet and bolster its business, Shopko announced the closure of 39 underperforming stores last month — including its Greybull location. Company leaders said Wednesday that they’re now planning to shut down another 38 locations, with the Thermopolis store among those targeted. A list attached to court filings indicates that another 85 or so stores could also be targeted, including the Shopkos in Green River and Mountain View.

The Powell store, however, appears to be safe.

“We are open for business,” Shopko CEO Russ Steinhorst wrote in a letter to customers across the country. “Our continuing stores are open.”

Steinhorst added in a news release that filing for Chapter 11 bankruptcy was difficult but necessary.

“In a challenging retail environment, we have had to make some very tough choices, but we are confident that by operating a smaller and more focused store footprint, we will be able to build a stronger Shopko that will better serve our customers, vendors, employees and other stakeholders through this process,” he said.

In a bankruptcy court filing, the Shopko CEO said that, like many other retail companies, the business has fallen victim to consumers shifting to online sellers.

“Retail companies like Shopko, with a substantial physical footprint, bear higher expenses than web-based retailers and are heavily dependent on store traffic, which has decreased significantly as consumers increasingly shop online rather than in malls or shopping centers,” Steinhorst said.

On top of that, he said Shopko has struggled to compete against bigger brick-and-mortar businesses like Walmart and Target, which have less debt and greater economies of scale. Steinhorst said those factors have allowed Shopko’s competitors to offer lower prices.

As for the store’s pharmacies, they haven’t performed as well as the company expected, Steinhorst said, attributing the problem in part to higher prices charged by its primary supplier, McKesson Corporation.

“Although Shopko has been able to reduce operating costs in its pharmacies, continually reducing costs in the face of declining margins has reached its limit,” Steinhorst said. “Shopko lacks purchasing scale to purchase drugs at costs similar to large national pharmacy chains, and has seen cost increases in excess of industry trends from ... McKesson.”

McKesson sued Shopko in a Wisconsin court last month over $67 million worth of unpaid bills and asked a judge to order Shopko to return its unsold products. Shopko officials argued that such an order would have forced the immediate closure of its pharmacies — and perhaps entire stores — and the judge declined McKesson’s request.

In recent months, Shopko sold off 82 of its 234 pharmacies. The Greybull pharmacy’s business, for instance, was sold to Basin Drug. That has left the town of Greybull without a pharmacy.

Shopko leaders now hope to sell off the assets from its remaining 134 pharmacies — including those in Powell — by the end of next week.

If Shopko can’t find a buyer to take over its pharmacy business in Powell, local residents can still fill prescriptions at Powell Drug. Additionally, the Powell Hospital District is in the process of expanding its in-house pharmacy into a retail location. The Powell hospital is accepting bids on the $577,463 project through Jan. 24. Today (Thursday) the State Loan and Investment Board will decide whether to award a grant to cover half of the cost — $288,732.

Shopko, meanwhile, hopes to completely emerge from Chapter 11 bankruptcy by April 15. If Shopko can’t move forward with its plan, Steinhorst said the company may have to liquidate — that is, sell off — its entire chain.

As of Wednesday, Shopko had 367 stores and more than 15,000 employees across 25 states. In the Big Horn Basin, Shopko has locations in Powell and Worland, plus the soon-to-be closed stores in Greybull and Thermopolis.