Is Rite Aid on the brink?

I've posted many times about the "two-per-channel theory" -- the idea that there's only room in today's marketplace for two (at the most) major players in any channel. If it's true, and I've seen nothing to indicate otherwise, that's bad news for a #3, like Rite Aid.

When the economy has gone smoothly, we've seen the #3s hurting, and in some cases dying (e.g., CompUSA), but most of them manage to scrape by. A poor economy, however, may be the end for many of them. This week we got news that Rite Aid may be delisted from the NYSE, since it's stock price has dropped well below a buck.

This Forbes article indicates that the problems are a combination of poor store performance ("... weak sales at the Brooks Eckerd stores it bought in mid-2007 ...") and heavy debt. There is hope though:

... Raymond James analyst John Ransom said the company's debts are particularly worrying to investors at a time when credit conditions are tight.

"All stocks have gotten destroyed lately, especially any company with a shaky balance sheet," he said in an email. "Rite Aid has the worst balance sheet of any company I follow."

In a client note, Ransom said the company is carrying $6.1 billion in long-term debt. But because Rite Aid has refinanced its debt, he believes it has the financial flexibility needed to implement its turnaround plans.