Annual results from Walgreens Boots Alliance show its operation in the UK continued to struggle in the final quarter of the year as footfall in its stores remained weak during the pandemic.
The group’s Retail Pharmacy International unit saw its fourth-quarter sales slide 15.4% to $2.3bn, mainly due to a 16.7% decrease in the UK.
Boots like-for-like retail sales fell 29.2% as shopper numbers were reduced by the crisis, particularly in high street, train station and airport locations. However, the group highlighted that footfall had improved steadily in the fourth-quarter compared with the third-quarter when like-for-like sales had plummeted 48%.
Boots market share was also said to be lower in all categories except beauty, as the pandemic impacted heavily on buying habits and consumers shifted purchasing to one-stop grocery shopping. However, the chain’s online operation benefitted with sales growth accelerating to 155%.
Like-for-like pharmacy sales in Boots edged up 0.4%, reflecting “favourable timing” on National Health Service (NHS) reimbursement, which mitigated the impact of lower prescription volume and reduced demand for pharmacy services.
The international unit’s adjusted gross profit decreased by 25.7%, reflecting lower UK retail sales, higher fulfilment costs, marketing investments to drive customer traffic and lower fixed supplier contributions.
Meanwhile, operating profit fell from $181m to a loss of $132m, primarily as a result of the sales slump in the UK. The group said that the adverse Covid-19 impact on operating income was approximately $300m.
Back in July, Boots revealed plans to cut up to 4,000 jobs and close opticians practices across the UK as it accelerated its turnaround programme to mitigate the “significant impact” on its business from the pandemic. The group confirmed today that it was continuing to focus on the recovery plan.
The wider Walgreens Boots Alliance group saw its fourth-quarter sales grow 2.3% to $34.7bn. This was driven by a 3.6% rise in its Retail Pharmacy USA division and a 4.3% increase in the Pharmaceutical Wholesale unit.
However, operating slipped 26% to $650m with the adverse Covid-19 impact estimated at $520m. This was partially offset by the group’s ‘Transformational Cost Management Program’ which is said to be on track to deliver in excess of $2bn in annual savings by fiscal 2022.
CEO Stefano Pessina commented: “I am pleased to report results that came in at the high end of our expectations as we continue to adapt and transform our business model to changing customer needs.
“Despite uncertainty amid the global Covid-19 pandemic, we are seeing gradual improvement in key US and UK markets and continued strong performance in our wholesale business. I’m also encouraged by the accelerating growth in our e-commerce platforms.”
He added: “Now, more than ever, our pharmacy-centered business is at the heart of community healthcare and we are expanding on that role for the future.”
NAM Implications:
- A shock for us all (Q3 – 48% drop, Q4 – 29% drop)
- Despite some improvement, suppliers have to anticipate a cut-to-fit approach from Boots.
- Time to focus on how say a 25% cut in outlet numbers might affect your business.
- Apart from watching for any announcements re their 600 branches located in City centres…
- (given the impact of home-working changes on local traffic…)
