Boots has delivered its ninth consecutive quarter of market share growth with gains across all categories, led by beauty.
Over the three months to 31 May, the health & beauty retailer saw its retail sales grow 13.4% as it continued to benefit from moves to improve its competitiveness, product offer and stores.
Boots noted that the number of transactions were up both in-store and online, with footfall growth ahead of the wider retail market. Its city centre flagships and travel stores saw the biggest increase after bouncing back from the effects of the pandemic, while digital sales also continued to grow, up 25.2% year-on-year.
The retailer said that beauty, especially skincare, was performing strongly (+18%), with May seeing the biggest week for the category outside of Christmas.
Boots in-house brands such as No7 had an “exceptional quarter”, driven by the success of its new ‘Future Renew’ range, with one product selling every two seconds on launch day and over half a million customer transactions in the first four weeks. The Boots suncare range, Soltan, also performed well, with sales up 19%.
Meanwhile, its new ‘Everyday’ essentials label saw 40% volume growth after appealing to cash-strapped shoppers. Several new value initiatives were launched in the quarter, including a 10% discount across thousands of Boots own brand lines for members of its Advantage scheme. This lead to a 65% increase in sign-ups to the loyalty programme.
In Healthcare, Boots recorded its best performance in six quarters, with pharmacy sales up 5.7%. This was driven by a good start to the hay fever season and OTC medication, including the launch of a new erectile dysfunction range, Eroxon, selling one every 30 seconds on the day of launch.
The group noted that further investment in the rejuvenation of the store estate was planned. And over the next year, Boots will continue to consolidate a number of stores in close proximity to each other.
Seb James, Managing Director, Boots UK and ROI, commented: “Our focus on offering our customers the best in healthcare and beauty, together with a continued commitment to great value, has been well received, and it is lovely to see more people choosing to shop with Boots. It is particularly pleasing to see our owned brands proving popular, including an exceptional No7 performance.”
Recently posted accounts for the Boots chain in the UK show its profitability improved last year after costs associated with its restructuring programme eased, and shoppers returned to its stores following the disruption caused by the pandemic.
Last year, Walgreens Boots Alliance (WBA) abandoned its planned sale of Boots UK due to market instability caused by the war in Ukraine, soaring inflation, and rising interest rates that combined to push up borrowing costs and impact financing availability. The company said at the time that no third party was able to make an offer that “adequately reflects the high potential value of Boots and its No7 Beauty Company”. At the time, WBA was said to be looking for bids of around £7bn.
However, reports in March suggested that a sale or flotation of Boots UK is back on the cards as WBA looks to speed up plans to refocus the business on the lucrative healthcare market in the US.
In its group third-quarter results released today, WBA cut its full-year earnings guidance as it fell short of Wall Street expectations due to lower consumer spending in the US and a drop in demand for Covid vaccines and testing.
CEO Rosalind Brewer said she was increasing WBA’s cost-cutting initiative from $3.5bn to $4.1bn and is taking immediate action to increase profitability in the company’s US healthcare segment.
“I am confident that our turnaround strategy positions WBA to drive sustainable core growth and deliver long-term shareholder value,” Brewer said in a statement.
The earnings miss is the first time WBA has underperformed analyst expectations since July 2020. However, the company beat revenue expectations, with sales up 8.6% to $35.4bn after growth in its retail pharmacy and healthcare segments.
WBA booked a net profit of $118m for the quarter, a 59% drop from the $289m reported in the same quarter last year. The company stated that the drop was due primarily due to lower operating income.
NAM Implications:
- Boots clearly on the way back.
- Making it increasingly apt for reflotation.
- And given better results than WBA…
- …making it a candidate for sale by WBA ‘at the right price’.
- (or even more appealing to Amazon?)
