After posting robust third-quarter results yesterday, Boots announced that it plans to close 300 more stores in the year ahead as part of its drive to rejuvenate its estate, increase efficiency and adjust to the shift to online shopping for health & beauty products.
The retailer, owned by Walgreens Boots Alliance (WBA), stated that it was “evolving the store estate” by shutting branches that were in close proximity to each other in order to direct staff to where they were needed and “focus investment more acutely in individual stores”. No redundancies are expected, with staff set to be offered redeployment to nearby stores.
Boots has around 2,200 outlets, having closed 200 sites in recent years as part of a restructuring programme to improve profitability amid rising costs and tough competition from physical and online retailers.
The retailer saw a huge uplift in its online sales during the pandemic, backed by significant investment in the channel. During its last quarter to 31 May, Boots saw digital sales climb 25.2% year-on-year, and they now account for around 14% of trade.
Analysts suggested that the latest round of store closures could be a precursor to WBA selling its UK arm. Last year, the US group abandoned its planned sale of Boots 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. At the time, WBA was said to be looking for bids of around £7bn.
Reports back in March suggested that a sale or flotation of Boots UK could be back on the cards as WBA looks to speed up plans to refocus the business on the lucrative healthcare market in the US.
WBA said yesterday that the Boots store closures were part of a “transformation plan, with 150 Walgreens branches in the US also set to be shuttered over the same period.
NAM Implications:
- The optimum size of the estate is determined by demand…
- …and the need for acceptable profitability per outlet.
- And reflects changing buying behaviour in online to offline.
- (With the ultimate aim of readying Boots UK for flotation?)
