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Dear Mr. Berko:

Dear E.P.:

Rite Aid Corp. (RAD-$1.22) sells for $1.22 a share because that’s precisely what it is worth today and not a penny more. This Camp Hill, Pa.-based drugstore/pharmacy chain reported its seventh consecutive quarterly loss for its fourth quarter ending Feb. 28. For the year, RAD reported a $2.9 billion loss, and approximately $1.8 billion of that loss derives from the write-down of its 2007 purchase of the Eckerd and Brooks chains. Management bet the farm that the Eckerd/Brooks purchase would enable RAD to compete effectively with Walgreen Co. and CVS. Well, they were red-light wrong. RAD’s debt exploded to $5.8 billion from $2.4 billion and same-store sales slipped 0.1 percent.

RAD has 4,900 stores. Prescription sales accounted for 68 percent of revenues and approximately 28,000 front-end products, candy, cigarettes, toiletries, etc., were 32 percent of revenues. There are seven analysts following RAD: One has a “strong buy” recommendation, two have a “strong sell,” three have a “hold,” and one has a “moderate sell.” I don’t see RAD earning a zloty, schilling, rupee or peso in 2010 or 2011. An enthusiastic management that took over almost nothing a few years ago and still has most of it will reduce advertising, store personnel and inventory to rein in costs. If management wishes revenues and profits to rise, it makes sense to increase advertising, inventory and personnel. I suspect management’s wild oats have turned to prunes and bran. As Jack Eckerd once said: “That ain’t no way to run a drugstore.”

I think there’s a 9.2 percent degree of probability that you can sell RAD 12 months from now at a higher price than you paid for the stock. RAD has good locations, but so do CVS and Walgreen Co. RAD sells the same products sold by Walgreen and CVS at similar prices and RAD is subject to the same economic variables as its profitable brethren. So, the only reason that RAD is losing big bucks is that its management sucks. They really suck. These guys couldn’t manage a lemonade stand, a two-car funeral, a paper route or an assembly line in a roach paste factory. And for this exemplary performance, Chairman and CEO Mary Sammons, who just turned 61, was paid $3 million last year. I guess that proves it’s easier to get older than it is to get smarter. Maybe it’s time for a change!

Of course, I can give you the names of a few other well-known companies whose shares are trading at $1 and change or less. However, be mindful that I’m not recommending a single one of them. So, if you have the risk tolerance and can afford the losses, then be my guest, call Charles Schwab and buy $3,000 worth of each of the following:

Immediately after GM filed for bankruptcy protection, the New York Stock Exchange suspended trading in the stock. Still, you might be able to buy shares on the OTC, or junk, market. The new symbol is GMGMQ. The “Q” indicates that the company is in bankruptcy. Sirius XM Radio Inc. (SIRI-35 cents) provides satellite radio services but is a skip, hop and bump from bankruptcy, too. Dana Holding Corp. (DAN-$1.45) designs, manufactures and sells products to the automobile manufacturer. Pier 1 Imports Inc. (PIR-$1.81) is a specialty retailer of imported home furnishings and gifts. Georgia Gulf Corp. (GGC-49 cents) produces resins, chlorides and home building products. Nautilus Inc. (NLS-$1.26) makes health and fitness products. Belo Corp. (BLC-$1.92) owns 20 television stations. At one time these were “once profitable and respected companies.” I guess things were so different before everything changed. I wish you enormous luck.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@comcast.net.