Boots has continued its strong run, delivering a thirteenth consecutive quarter of market share growth after robust performance in both its retail and pharmacy divisions. However, its parent, Walgreens Boots Alliance (WBA), announced plans to close more underperforming stores in the US after cutting its profit forecast due to weak consumer spending impacting its retail operations.
Comparable retail sales at Boots in the UK rose by 6% over three months to 31 May, with growth across all categories. The group noted that this was against tough comparatives of a 13% increase in the prior-year quarter.
Digital sales continued to grow strongly, up 13.8%, after investment in its app attracted more shoppers to the channel.
In-store sales were boosted by more brands joining its beauty line-up and increased footfall in Boots’ flagship, destination health & beauty and travel stores. Airport stores were said to have performed particularly well following refits of four sites during the quarter.
Boots highlighted that shoppers had continued to respond well to its renewed focus on value, with its Price Advantage offer contributing to a 5.8% increase in sign-ups to its loyalty scheme.
Meanwhile, pharmacy sales climbed 5.8%, driven by increased take-up of the retailer’s healthcare services. Boots noted that the NHS Pharmacy First Service initiative continued to be well received, with it delivering over 20,000 consultations in England on average each month since the launch in January. In retail health, “steady” sales growth was bolstered by increased demand for cough and cold products and vitamins and supplements.
“This is another set of consistently strong results for Boots. I am pleased to see our positive momentum continue across the whole business, with both retail and healthcare increasing sales and a thirteenth consecutive quarter of market share growth,” said Sebastian James, Boots UK & ROI CEO.
“We continue to focus on making exciting new brands and services accessible, whilst focusing on value and rewarding loyalty. We are committed to delivering a fantastic experience for customers however they shop with us.”
Meanwhile, shares in WBA slid to a 27-year low yesterday after the US firm cut its profit outlook and announced more store closures, citing difficult times for its retail pharmacy business as cash-strapped American consumers reined in their spending.
CEO Tim Wentworth, who joined its board last October, had already set in motion a complete overhaul of the business that includes store closures, the removal of multiple mid-level executives, and a $1bn cost-cutting plan.
The company didn’t announce a specific number of store closures, but it said yesterday that it is planning “significant” closures of underperforming stores across America as part of a multiyear optimisation programme.
On a call with analysts, Wentworth said that “changes are imminent” for the roughly 25% of its 8,600 US stores that aren’t profitable and Walgreens’ strategic review will “include the closure of a significant portion of these underperforming stores.”
In an interview with the Wall Street Journal, Wentworth revealed that the closures would focus on locations that aren’t profitable, too close to each other or stores struggling with theft.
Drugstores in the US have been squeezed by lower reimbursements for pharmaceuticals and weaker spending from inflation-stretched consumers. “In US retail pharmacy, we witnessed continued pressure on the US consumer. Our customers have become increasingly selective and price-sensitive in their purchases,” said Wentworth.
Over the quarter, WBA’s net profit, adjusted for certain items, was down 36.5% to $545m on sales up 2.6% to $36.4bn.
Its US Pharmacy division saw sales grow 2.3% to $28.5bn after an increase in comparable pharmacy sales was partly offset by a decline in retail sales.
Walgreens slashed its outlook for annual earnings per share by about 12%, sending its shares down as much as 25% yesterday afternoon.
Walgreens expects the current trading conditions to persist into fiscal 2025, with Wentworth saying: “We are at a point where the current pharmacy model is not sustainable and the challenges in our operating environment require we approach the market differently.”
He stated that the remodelling of its retail pharmacy business would take a few “quarters … and not necessarily multiple years”, adding: “The bottom line is that I am confident that [Walgreens] will be a leader in the future of healthcare with pharmacy and retail at its centre.
“But we also acknowledge where we are today, and what we need to do to realise our longer-term ambitions. The severity and duration of the challenges in the operating environment have only added urgency.”
