Boots has suffered another big fall in sales after the latest round of Covid-19 restrictions impacted footfall at its stores in high streets, train stations and airports.
Results from Walgreens Boots Alliance (WBA) show its retail operation in the UK saw like-for-like sales slide 17.9% over the second quarter to 28 February. The figure marks a setback from the recovery the health & beauty chain saw in the autumn when sales fell only 9.1% compared to the 29.2% and 48% declines recorded in the previous two quarters.
Boots highlighted that whilst it continued to gain market share in the beauty category, the latest pandemic-related restrictions impacted all other categories as consumers once again shifted towards one-stop grocery shopping.
However, its online store continued to perform well with sales surging up 105%. And comparable pharmacy sales increased 3.2%, boosted by the timing of NHS reimbursement, and stronger demand for pharmacy services, which mitigated the impact of lower prescription volume.
WBA’s International division as a whole saw second-quarter sales increase 23.9% on a constant currency basis to $5.4bn, entirely due to the company’s new joint venture in Germany. However, operating profit plummeted 31.8% to $106m due to the weakness in the UK business, which was only partly offset by cost cuts and strong online performance.
Across the wider WBA group, second-quarter revenues rose 3.5% to $32.8bn. This was driven by the joint venture in Germany and its core US business which saw comparable sales increase 2% to $27.3bn after robust pharmacy sales (+4.5%) offset weaker retail sales (-3.5%).
However, WBA’s adjusted operating profit fell 22.9% to $1.2bn with the group blaming the adverse impacts of the pandemic on both its US and International division which was partly offset by cost savings related to the company’s ‘Transformational Cost Management Program’.
Rosalind Brewer, WBA’s new Chief Executive that took over from Stefano Pessina last month, said: “Overall, we have achieved a good financial quarter with results well ahead of expectations, despite significant impacts from Covid-19, and we have raised our full-year EPS guidance.
“I am optimistic about our ability to drive sustainable, long-term value for our shareholders, while acknowledging that there is still work to be done to stabilise the base business.”
The group raised its 2021 profit growth forecast, saying that it expects to benefit from the Covid-19 vaccination programme in the US that should offset the impact of a weak flu season on retail sales.
NAM Implications:
- Key is ‘consumers once again shifted towards one-stop grocery shopping’
- i.e. suppliers need to ensure they have grocery listings for the parts of their portfolio currently only available in Boots…
- …whilst optimising their online presence in Boots.
- The issue will be whether WBA will feel the need to write down Boots’ market value even further…
- i.e. $2bn write-down in mid-2020.
