As its parent company prepares to be taken private, Boots has continued its strong run, with a 17th consecutive quarter of market share gains as it focuses on refreshing its offer and extending its reach.
During its third quarter to 31 May, Boots saw like-for-like sales in its retail operation climb 6.0% – an improvement on the 5.1% increase recorded in the previous period, despite worsening trading conditions on the high street. Its online store grew 14.8% and now accounts for 17% of the total retail sales.
Boots attributed its healthy growth to the introduction of on-trend beauty brands and the expansion of its wellness offer, adding nine new brands in the quarter, alongside new own-label lines, Habi and Modern Chemistry.
Meanwhile, pharmacy like-for-like sales increased 5.4%, driven by the strong performance of its private healthcare services.
In March, it was announced that Sycamore Partners had agreed a deal to acquire Walgreens Boots Alliance (WBA) in a transaction worth up to $23.7bn, including debt. The private equity firm is expected to retain the US retail business and sell or spin off the rest, including Boots in the UK.
WBA’s total third-quarter sales rose 7.2% to $39.0bn, reflecting growth in its US Retail Pharmacy (+7.8%) and International (+5.9%) divisions.
In the US, pharmacy sales jumped 14.6%, benefiting from higher branded drug inflation and mix impacts. However, retail sales decreased 2.4%, impacted by weaker sales in grocery and household, health & wellness, and beauty as US consumers reined in their spending amid an uncertain economic environment.
The group beat analysts’ estimates for third-quarter profit, which was helped by cost-cutting measures such as store closures. On an adjusted basis, WBA earned 38 cents per share for the period, ahead of forecasts of 34 cents per share.
Reported operating profits more than halved to $53m as a result of non-cash impairment charges for certain “long-lived assets”. Adjusted operating profit slipped from $613m to $558m.
Adjusted operating profits for the international side of the business jumped 20.2% to $214m, thanks to the strong performance of Boots and market growth in Germany.
“Third quarter results reflect continued improvement in our US Healthcare segment and benefits from our cost savings initiatives, while we continued to see weakness in our US front-end sales,” said Chief Executive Tim Wentworth.
“We remain focused on our turnaround plan, which will require time, disciplined focus and a balanced approach to manage future cash needs with investments necessary to navigate an evolving pharmacy and retail environment.”
Since taking on the reins of business in 2023, Wentworth has unveiled a series of changes, including the removal of multiple mid-level executives, a $1bn cost-cutting exercise, and plans to close 1,200 stores in the US.
The deal with Sycamore followed a tumultuous few years for WBA, which has led to its market capitalisation dropping 90% since 2015 to around €10bn. It has been squeezed by pharmacy reimbursement headwinds, softer consumer spending, and competition from rival pharmacies, grocery chains, and Amazon. It has also been grappling with a troubled push into the healthcare sector.
Sycamore’s takeover is set to be completed in the fourth quarter of this year.
NAM Implications:
- Boots are on a continuing roll and gathering momentum.
- Besides appearing to be everything Walgreens is not.
- Add geographical separation in totally different financial arenas…
- …making it ideal for a quick sale.
- Leaving the new owners free to focus on applying the PE playbook to Walgreens…
