Days after Walgreens Boots Alliance (WBA) announced that it would retain ownership of its Boots business in the UK, latest trading figures confirm the chain is continuing to recover from the effects of the pandemic, aided by its ongoing transformation programme.
During its third-quarter to 31 May, total sales at Boots UK grew 13.5% after recovering from the significant declines last year when lockdowns impacted its high street and travel sites, and shoppers turned to supermarkets for their health & beauty needs.
On the retail side of the business, comparable sales jumped 24.0%, with the retailer claiming it made market share gains across all categories, led by beauty. Footfall in its stores improved 45% compared to the year-ago quarter, although Boots noted that it remains below pre-pandemic levels. However, this has been offset by gains online, with the channel now accounting for over 13% of retail sales in the quarter compared to 6% before the Covid crisis.
The group noted that it was seeing strong performance in its flagship and travel locations, whilst basket sizes were up approximately 14% versus pre-pandemic levels as the chain continued to improve its product offering and revamp its store portfolio. Over 100 of its Beauty Reinvention halls are now open, with more to follow this year
Amid the toughening economic conditions, Boots is also focusing on improving its competitiveness. It rolled out its ‘price freeze’ initiative across more than 1,500 own-label products earlier this month and is offering exclusive discounts on over 400 products each month to members of its Boots Advantage Card scheme.
Meanwhile, comparable pharmacy sales at Boots slipped 0.4% due to tough comparatives. However, the group noted that pharmacy services were up 22%, despite lower Covid testing and vaccinations, reflecting demand for its new online healthcare services.
“The execution of our transformation programme and a sharp focus on expanding our key categories of healthcare and beauty, has driven strong sales and market share growth and further strengthened our position as the UK’s leading health and beauty retailer,” said Sebastian James, Managing Director of Boots UK & ROI.
“Significant investment in both our digital platforms and in our stores is expected to drive continued market-leading growth.”
For the WBA group as a whole, sales from continuing operations decreased 4.2% (-2.8% constant currency) to $32.6bn as it lapped strong growth last year and was held back by its AllianceRx Walgreens unit.
US retail comparable sales grew 2.4% (excl. tobacco), reflecting good growth in health and wellness ranges. Comparable pharmacy sales increased 2.0%.
However, shares in the WBA fell amid broader market weakness. The group still expects low single-digit growth in its adjusted earnings for the year and warned on costs related to investments in labour and in its new consumer health business.
WBA scrapped the plan to sell Boots and the No7 Beauty Company as no buyer came up with an adequate offer after market instability impacted financing availability for private equity firms.
After announcing the end of the sale process earlier this week, CEO Rosalind Brewer said: “It is an exciting time for these businesses, which are uniquely positioned to continue to capture future opportunities presented by the growing healthcare and beauty markets. The Board and I remain confident that Boots and No7 Beauty Company hold strong fundamental value, and longer term, we will stay open to all opportunities to maximise shareholder value for these businesses and across our company.”
She stated yesterday that WBA would continue to look at alternatives for strategic divestments as it realigns its focus towards the lucrative healthcare market in the US.
NAM Implications:
- Priorities:
- Check your Boots business vs these stats of the recovery.
- If different, establish fair share of sales and assess any under/over-trading.
- Given the WBA decision to retain Boots…
- …there will be renewed energy/resource applied to justify the decision.
- (and possibly prepare it for flotation/sale when market conditions are more appropriate)
- Either way, you need to be part of (and secure your fair share) of the process…
