Boots has revealed plans to cut up to 4,000 jobs and close opticians practices across the UK as it accelerates its turnaround programme to mitigate the “significant impact” on its business from the coronavirus pandemic.
The announcement was made alongside the release of Walgreens Boots Alliance’s third-quarter results to 31 May. These showed that like-for-like retail sales at Boots UK had plummeted 48% year-on-year, whilst Boots Opticians was down 72%.
While many Boots stores remained open throughout the lockdown to serve health essentials, the retailer highlighted that it had seen footfall reduce “dramatically”, with its revenue-driving beauty and fragrance counters also closed. The retailer said it had lost share as consumers switched most of their shopping to the grocers.
Meanwhile, like-for-like pharmacy sales fell 1%, reflecting lower prescription volume and reduced demand for services during the pandemic.
Although restrictions are beginning to lift, Boots stated that with an uncertain economic outlook, it was expecting the high street to take “considerable time to recover”.
The company revealed it has now commenced a consultation process for a “significant restructuring” across its head office, and store and opticians teams. This is expected to result in a reduction of its headcount of more than 4,000 (7% of the workforce), and the closure of 48 Boots Opticians outlets.
“As the further effects of the pandemic become known and macroeconomic conditions evolve, Boots will continue to review and progress its Transformation Plan,” it said.
The group highlighted that the crisis had accelerated the shift by consumers towards digital channels and online shopping. Boots.com saw sales jump 78% during the period. The retailer plans to continue increasing investment in this channel as a key part of its growth strategy.
Boots was already in the process of closing around 200 underperforming stores to support its turnaround programme. It has also been revamping its stores and improving its beauty offering to win back shoppers from value-oriented chains and fast-growing online rivals.
Sebastian James, Managing Director of Boots UK, said: “The proposals announced today are decisive actions to accelerate our Transformation Plan, allow Boots to continue its vital role as part of the UK health system, and ensure profitable long-term growth. In doing this, we are building a stronger and more modern Boots for our customers, patients and colleagues.”
He added: “We recognise that today’s proposals will be very difficult for the remarkable people who make up the heart of our business, and we will do everything in our power to provide the fullest support during this time.”
The wider Walgreens Boots Alliance group posted a third-quarter loss as the coronavirus outbreak drove up costs and impacted demand for higher margin products. The group stated that the most significant impact from the crisis was in the UK market, requiring a review resulting in non-cash impairment charges of $2bn.
The adverse sales impact was up to $750m, although the group’s total sales still rose 1.2% (constant currency) to $34.6bn, supported by its pharmacy operations in the US where like-for-likes grew 3%.
Walgreens Boots Alliance posted an operating loss of $1.6bn, compared to a profit of $1.2bn a year ago, mainly due to the impairment charges relating to its UK division.
CEO Stefano Pessina said: “Prior to the pandemic our financial performance for fiscal 2020 was on track with our expectations. However, this unprecedented global crisis led to a loss in the quarter as stay-at-home orders affected all of our markets.”
He added: “Shopping patterns are evolving more rapidly than ever as consumers further embrace digital options, spurring us to accelerate our ongoing investments in digital transformation and neighbourhood health destinations.”