1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For The Fiscal Year Ended February 28, 1998.

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For The Transition Period From __________ To __________

Commission File Number 1-5742

RITE AID CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)

Delaware 23-1614034
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

30 Hunter Lane, Camp Hill, Pennsylvania 17011
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (717) 761-2633

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange
Title of each class on which registered
------------------- -------------------

Common Stock, $1.00 par value New York Stock Exchange
Pacific Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [ X ] Yes [ ] No

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

The aggregate market value of the voting stock of the registrant held
by non-affiliates of the registrant on May 4, 1998 based on the closing price at
which such stock was sold on the New York Stock Exchange on such date was
approximately $8,053,762,000.

The registrant's Common Stock outstanding at May 4, 1998 was
258,310,018 shares, par value $1.00 per share.

Portions of the Annual Report to Stockholders for the year ended
February 28, 1998 are incorporated by reference into Parts I, II and IV of this
Report. Portions of the Proxy Statement prepared for the 1998 Annual Meeting of
Stockholders are incorporated by reference into Part III of this Report.

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RITE AID CORPORATION

INDEX TO ANNUAL REPORT ON FORM 10-K

CAPTION PAGE
------- ----

PART I

ITEM 1. BUSINESS 1
ITEM 2. PROPERTIES 1
ITEM 3. LEGAL PROCEEDINGS 2
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 2

UNNUMBERED ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT 2

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 3
ITEM 6. SELECTED FINANCIAL DATA 3
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION 4
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 4
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 4
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 4

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 4
ITEM 11. EXECUTIVE COMPENSATION 4
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 4
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 5

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K 5

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PART I

ITEM 1. BUSINESS

(a) General Development of Business

The registrant, incorporated in 1968, is one of the largest retail
drugstore chains in the United States. As of February 28, 1998, the registrant
operated 3,975 drugstores, averaging within a range of approximately 7,200 to
20,000 square feet per store in size, in 32 eastern, southern and western
states and the District of Columbia. During the fiscal year ended February 28,
1998, the registrant added 411 of the larger prototype storerooms, including
235 that were relocations or expansions of existing stores. In addition, 332
stores were acquired in late August with the acquisitions of Harco, Inc., and
K&B, Incorporated. Also during this period, 156 smaller units were closed.

(b) Financial Information About Industry Segments

The company's primary business is the operation of retail drugstores.

Pharmacy service forms the core of the registrant's business, with
prescriptions accounting for 50.1% of drugstore sales in the year ended
February 28, 1998. The registrant's drugstores cater to convenience, offering a
full selection of health and personal care products, seasonal merchandise and a
large private label product line. Express mail with complementary services and
one-hour photo departments have been added in select locations. Rite Aid's
Eagle Managed Care Corp. subsidiary markets prescription plans and sells other
managed health care services to employers, health maintenance organizations and
government-sponsored employee benefit programs.

Additional information set forth under the caption "Management's
Discussion and Analysis of Results of Operations and Financial Condition"
commencing on page 4 and ending on page 7 of the 1998 Annual Report, is
incorporated herein by reference, excluding any projections and forecasts, all
of which shall not be deemed a part of this Annual Report on Form 10-K. At
February 28, 1998, the registrant employed approximately 83,000 persons.

(d) Financial Information About Foreign and Domestic and Export Sales

Not Applicable.

ITEM 2. PROPERTIES

The registrant's general offices and corporate headquarters are located
in a 205,000 square foot building in Camp Hill, Pennsylvania owned by the
registrant.

The registrant operates the following distribution centers:

Owned or Approximate
Location Leased Square Footage
- -------- ------ --------------

Shiremanstown, Pennsylvania Owned 350,000
Rome, New York Owned 291,000
Nitro, West Virginia Owned 280,000
Perryman, Maryland Leased 875,000
Tuscaloosa, Alabama Owned 285,000
Pontiac, Michigan Leased 370,000
Ogden, Utah Owned 638,000
Woodland, California Owned 500,000
Wilsonville, Oregon Leased 500,000
Las Vegas, Nevada Leased 281,000

The registrant closed its Winnsboro, South Carolina and Ontario,
California distribution centers in fiscal 1998 and the Melbourne, Florida
distribution center was closed in fiscal 1996. All of the closed distribution
centers were sold during fiscal 1998. The registrant intends to close its
Shiremanstown facility and move those operations to the Perryman, Maryland
distribution center. The registrant also owns it 52,200 square foot ice cream
manufacturing facility located in El Monte, California.

The registrant leases most of its drugstore facilities under
noncancelable operating leases, many of which expire within ten to fifteen
years. In addition to minimum rental payments, which are set at competitive
market rates, certain leases require additional payments based on sales volume,
as well as reimbursement for taxes, maintenance and insurance. Most of the
registrant's leases contain renewal options, some of which involve rent
increases. At February 28, 1998, the registrant had 3,975 retain drugstores.

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ITEM 3. LEGAL PROCEEDINGS

Not Applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not Applicable.

EXECUTIVE OFFICERS OF THE REGISTRANT

Pursuant to General Instruction G(3) of Annual Report on Form 10-K, the
following is included as an Unnumbered Item in Part I of this Annual Report in
lieu of being included in the Proxy Statement for the 1998 Annual Meeting of
Stockholders to be held on June 24, 1998.

The following is a list of names and ages of all of the executive
officers of the registrant, indicating all positions and offices with the
registrant held by each such person and each such person's principal
occupations or employment during the past five years. All such persons have
been appointed to serve until the next annual election of officers (to be held
on June 24, 1998) and until their successors are appointed, or until their
earlier resignation or removal. No person other than those listed below has
been chosen to become an executive officer of the registrant.

First
Elected
Name Age Offices and Positions Held an Officer
- ---- --- -------------------------- ----------

Martin L. Grass 44 Chairman of the Board and Chief Executive Officer 1980

Timothy J. Noonan 56 President and Chief Operating Officer 1973

Franklin C. Brown 70 Vice Chairman of the Board 1969

Frank M. Bergonzi 52 Executive Vice President 1977

Beth J. Kaplan 40 Executive Vice President 1996

Kevin J. Mann 45 Executive Vice President 1988

William A. K. Titelman 51 Executive Vice President 1998

Eric S. Elliott 34 Senior Vice President 1994

Elliot S. Gerson 56 Senior Vice President and Secretary 1995

Charles R. Kibler 51 Senior Vice President 1987

Philip D. Markovitz 57 Senior Vice President 1974

Ronald A. Miller 58 Senior Vice President 1981

Robert R. Souder 58 Senior Vice President 1972

Joseph S. Speaker 39 Senior Vice President 1991

Kent L. Whiting 38 Senior Vice President 1992

Richard J. Varmecky 45 Vice President and Treasurer 1987

Each of the executive officers listed above has served the registrant
or its subsidiaries in their present executive capacities for the past five
years, except for the following individuals:

Mr. Grass has been Chairman of the Board and Chief Executive Officer of
the registrant since March 4, 1995. Previously, Mr. Grass was President and
Chief Operating Officer of the registrant for more than five years.

Mr. Noonan was appointed President and Chief Operating Officer on March
4, 1995. Previously, Mr. Noonan was Executive Vice President of Drugstore
Operations for the registrant, a position he held for more than five years.

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Mr. Brown was appointed Vice Chairman of the Board of Directors of the
registrant in July 1997. Previously, Mr. Brown was Executive Vice President and
Chief Legal Counsel for more than five years.

Mr. Bergonzi was appointed Executive Vice President and Chief Financial
Officer of the registrant on March 4, 1995. Previously, Mr. Bergonzi was Senior
Vice President of Finance for the registrant, a position he held for more than
five years.

Ms. Kaplan was appointed Executive Vice President of Marketing of the
registrant on September 9, 1996. Previously, Ms. Kaplan was Vice President of
Procter & Gamble Cosmetics and Fragrances, from March 1994 to August 1996, and
General Manager, Procter & Gamble, Food and Beverage, from January 1991 to
February 1994, both divisions of Procter & Gamble N.A.

Mr. Mann was appointed Executive Vice President of Category Management
of the registrant on September 1996. Previously, Mr. Mann was Executive Vice
President of Marketing for the registrant since March 4, 1995. Prior to March 4,
1995, Mr. Mann was Senior Vice President of Purchasing for the registrant, a
position he held for more than five years.

Mr. Titelman joined the registrant in March 1998. Previously, Mr.
Titelman was a partner and member of the executive committee in the law firm of
Klett Lieber Rooney & Schorling for more than five years.

Mr. Elliott was appointed President and Chief Executive Officer of the
registrants wholly-owned subsidiary Eagle Managed Care Corp. on May 1, 1998.
Previously, Mr. Elliott was Senior Vice President, Managed Care from March 1997
to April 1998; Vice President, Pharmacy Marketing from March 1996 to February
1997; Vice President, Third Party Administration from March 1995 to February
1996; Assistant Vice President, Third Party Administration from March 1994 to
February 1995; Director, Third Party Administration from November 1993 to
February 1994; and Assistant Director Retail Accounting from August 1989 to
November 1993.

Mr. Gerson was appointed Senior Vice President, General Counsel and
Secretary during August 1997. Previously, Mr. Gerson held the position of
Senior Vice President and Assistant Chief Legal Counsel since joining the
registrant in November 1995. Prior to joining the registrant, Mr. Gerson was a
partner in the law firm of Bolger, Picker, Hankin & Tannenbaum from May 1993 to
November 1995, and a partner in the law firm of Wolf, Block, Schorr and
Solis-Cohen from May 1984 to May 1993.

Mr. Kibler was appointed Senior Vice President of Drugstore Operations
on March 4, 1995. Previously, Mr. Kibler served as Vice President of Drugstore
Operations for the registrant for more than five years.

Mr. Speaker was appointed Senior Vice President of Finance and
Administration on May 24, 1996. Previously, Mr. Speaker served as Vice President
and Retail Controller since April 1993. From February 1991 until his appointment
as Vice President, he had the positions of Assistant Vice President and Retail
Controller. Mr. Speaker attained the status of Retail Controller in June 1989.

Mr. Whiting was appointed Senior Vice President of Information Services
on April 18, 1996. He rejoined the registrant in February 1996 as Vice President
of Strategic Business Solutions. From March 1995 until rejoining the registrant,
Mr. Whiting was Vice President of Operations for ADT Data Systems. Prior
thereto, he held the positions of Assistant Vice President and Director of
Strategic Business Solutions for the registrant since 1988.

Mr. Varmecky was appointed Vice President and Treasurer of the
registrant in July 1995. Previously, Mr. Varmecky held the positions of
Assistant Vice President and Corporate Controller of the registrant for more
than five years.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The information set forth under the caption "Common Stock and
Dividends," which appears on the inside back cover page of the registrant's 1998
Annual Report, is incorporated herein by reference.

ITEM 6. SELECTED FINANCIAL DATA

The information set forth under the caption "Ten-Year Financial
Review," which appears on pages 22 and 23 of the registrant's 1998 Annual
Report, is incorporated herein by reference.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION

The information set forth under the caption "Management's Discussion
and Analysis of Results of Operations and Financial Condition," which appears on
pages 4 through 7 of the registrant's 1998 Annual Report, is incorporated herein
by reference.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The table below provides information about the registrants market
sensitive financial instruments and constitutes a "forward-looking statement."
The registrants major market risk exposure is changing interest rates. Exposure
to market risk for changes in interest rates relates primarily to long-term debt
obligations. The registrant primarily enters into debt obligations to support
general corporate purposes including capital expenditures and working capital
needs. The registrants policy is to manage interest rates through the use of a
combination of commercial paper and fixed rate long-term debt obligations. The
registrant has no negative cash flow exposure due to rate changes for fixed rate
long-term debt obligations. All items described are nontrading.

(Dollars in thousands) Weighted Fixed Weighted
Average Rate Average
Commercial Interest Long-term Interest
Maturity Paper Rate Debt Rate
- -------- ----- ---- ---- ----

1999 $400,000 5.7% $ 7,288 6.90%
2000 - 3,055 7.93%
2001 - 2,800 7.99%
2002 - 352,536 6.71%
2003 - 655,216 5.29%
Thereafter - 1,082,341 7.38%
---------- ------------
Total $400,000 $2,103,236
========== ============

Fair value at February 28, 1998 $400,000 $2,263,751
========== ============

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statement information, which appears on
pages 8 through 21 of the registrant's 1998 Annual Report, is incorporated
herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

For information with respect to the executive officers of the
registrant, reference is made to "Executive Officers of the Registrant," set
forth as an Unnumbered Item in Part I of this Annual Report on Form 10-K. The
information set forth under the caption "Election of Directors" in the
registrant's Proxy Statement for the 1998 Annual Meeting of Stockholders to be
held June 24, 1998 is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information set forth under the caption "Compensation of Executive
Officers" in the registrant's Proxy Statement for the 1998 Annual Meeting of
Stockholders to be held June 24, 1998 is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information set forth under the caption "Security Ownership of
Certain Beneficial Owners and Management" in the registrant's Proxy Statement
for the 1998 Annual Meeting of Stockholders to be held June 24, 1998 is
incorporated herein by reference.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information set forth under the caption "Related Party
Transactions" in the registrant's Proxy Statement for the 1998 Annual Meeting of
Stockholders to be held June 24, 1998 is incorporated herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) List of Documents Filed as Part of this Report

(1) Financial Statements

The following consolidated financial statements of the
registrant and its subsidiaries, required to be included in Part II, Item 8 of
this Annual Report on Form 10-K, are included in the 1998 Annual Report and are
incorporated herein by reference:

Independent Auditors' Report

Consolidated Balance Sheets - February 28, 1998 and
March 1, 1997

Consolidated Statements of Income - Each of the years in
the three year period ended February 28, 1998

Consolidated Statements of Stockholders' Equity - Each of
the years in the three year period ended February 28, 1998

Consolidated Statements of Cash Flows - Each of the years in
the three year period ended February 28, 1998

Notes to Consolidated Financial Statements

(2) Financial Statement Schedules

The following additional information for the years 1998, 1997
and 1996 is included in Part IV of this Report:

Page No.
--------

Schedule II - Valuation and Qualifying Accounts 8

Independent Auditors' Report 9

All other schedules are omitted because they are not required,
inapplicable or the information is included in the consolidated financial
statements or the notes thereto.

Financial statements of 50% or less owned companies have been
omitted since they do not constitute significant subsidiaries.

(3) Exhibits (numbered in accordance with Item 601 of
Regulation S-K)

Exhibit Incorporation
Numbers Description by Reference to
------- ----------- ---------------

(2) Not Applicable -----

(3) (i) Restated Articles of Incorporation Exhibit (4.1) to Form S-3
dated December 12, 1996 filed January 10, 1997

(ii) By-laws Exhibit (3a) to Form S-1
Registration Statement
filed April 26, 1968

Amendments to By-laws approved Exhibit (3) to Form 10-K
April 6, 1983 filed May 29, 1983

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(4) The rights of security holders of registrant are -----
defined by a) the Laws of the State of Delaware,
b) the Certificate of Incorporation of registrant
and c) the By-laws of registrant. The Certificate of
Incorporation and By-laws of registrant are hereby
incorporated by reference in accordance with Exhibit
(3) above.

(9) Not Applicable -----

(10) (i) Not Applicable -----

(ii) Not Applicable -----

(iii) Salary Continuation Agreement with Exhibit (10)(iii) to Form
Key Officers* 10-K filed May 29, 1983

1990 Omnibus Stock Incentive Plan, Exhibit 4 to Form S-8
as amended* filed July 12, 1996.

Annual Performance-Based Incentive Included in Proxy
Program* Statement dated June 7,
1995

Deferred Compensation Agreement* Exhibit (10)(iii) to Form
10-K filed May 31, 1996

(11) Statements re Computation of Per Share Earnings Included herein

(12) Statements re Computation of Ratios Included herein

(13) 1998 Annual Report to Stockholders Included herein

(16) Not Applicable -----

(18) Not Applicable -----

(21) Registrant's Subsidiaries Included herein

(22) Not Applicable -----

(23) Consent of Independent Certified Public Accountants Included herein

(24) Not Applicable -----

(27) Financial Data Schedules Included herein
(EDGAR Filing Only)

(28) Not Applicable -----

* Constitutes a compensatory plan or arrangement required to be filed with this
Form.

(b) Reports on Form 8-K

None

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated: May 18, 1998 RITE AID CORPORATION
(Registrant)

By: /s/Martin L. Grass
-----------------------------------
Martin L. Grass, Chairman of
the Board of Directors and
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the following on behalf of the registrant and in
the capacities and on the dates indicated:

May 18, 1998 /s/Martin L. Grass
--------------------------
Martin L. Grass
Chairman of the Board of Directors,
Chief Executive Officer and Director

May 18, 1998 /s/Timothy J. Noonan
--------------------------
Timothy J. Noonan
President, Chief Operating Officer and Director

May 18, 1998 /s/Frank M. Bergonzi
--------------------------
Frank M. Bergonzi
Chief Financial Officer

May 18, 1998 /s/Franklin C. Brown
--------------------------
Franklin C. Brown
Director

May 18, 1998 /s/Alex Grass
--------------------------
Alex Grass
Director

May 18, 1998 /s/Nancy A. Lieberman
--------------------------
Nancy A. Lieberman
Director

May 18, 1998 /s/Preston Robert Tisch
--------------------------
Preston Robert Tisch
Director

May 18, 1998 /s/Gerald Tsai, Jr.
--------------------------
Gerald Tsai, Jr.
Director

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RITE AID CORPORATION AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED FEBRUARY 28, 1998, MARCH 1, 1997 AND MARCH 2, 1996
(Dollars in Thousands)

Balance at Additions Additions Balance at
Beginning Charged to Charged to End
of Costs and Other of
Classification Period Expenses Accounts Deductions Period
- -------------- ------ -------- -------- ---------- ------

Allowances deducted from
accounts receivable for
estimated uncollectible
amounts:

Year ended February 28, 1998 $ 14,583 11,001 1,800 (a) 13,288 $ 14,096

Year ended March 1, 1997 $ 5,545 13,178 7,503 (b) 11,643 $ 14,583

Year ended March 2, 1996 $ 5,079 16,785 - 16,319 $ 5,545

(a) Allowance for estimated uncollectible accounts acquired from Harco, Inc.
and K&B, Incorporated on August 27, 1997.

(b) Allowance for estimated uncollectible accounts acquired through the
acquisition of Thrifty PayLess Holdings, Inc. on December 12, 1996.

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INDEPENDENT AUDITORS' REPORT

The Board of Directors
Rite Aid Corporation:

Under date of April 14, 1998, we reported on the consolidated balance sheets of
Rite Aid Corporation and subsidiaries as of February 28, 1998 and March 1, 1997,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the years in the three-year period ended February 28,
1998, as contained in the 1998 annual report to stockholders. These consolidated
financial statements and our report thereon are incorporated by reference in the
annual report on Form 10-K for the year 1998. In connection with our audits of
the aforementioned consolidated financial statements, we also audited the
related consolidated financial statement schedule as listed in the accompanying
index. This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits.

In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.

KPMG Peat Marwick LLP

Harrisburg, Pennsylvania
April 14, 1998

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EXHIBIT INDEX

Exhibit No. Description
- ----------- -----------

11 Statement Regarding Computation of Per Share Earnings.

12 Statement Regarding Computation of Ratios of Earnings to Fixed Charges.

13 1998 Annual Report to Stockholders.

21 Registrant's Subsidiaries.

23 Consent of Independent Certified Public Accountants.

27 Financial Data Schedule for the Year Ended February 28, 1998.
(EDGAR filing only)

27.1 Restated Financial Data Schedule for the Year Ended March 1, 1997.
(EDGAR filing only)

27.2 Restated Financial Data Schedule for the Year Ended March 2, 1996.
(EDGAR filing only)

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