Boots UK suffered a significant fall in profits last year as weakening sales and pressure on margins to remain competitive took its toll.
Accounts filed at Companies House for the UK division of Walgreens Boots Alliance (WBA) show the health & beauty chain’s pre-tax profit slid 20.1% to £398m in the year ending 31 August 2018. Operating profit was down 22.3% to £391m, with margin slipping from 7.2% to 5.8%.
Total revenue fell 2.3% to £6.79bn, compared to a 0.8% fall the year before.
Boots stated that sales and margins in its retail division were impacted by the “highly competitive nature” of the health & beauty category with it having to counter rivals pricing actions and promotions.
Meanwhile, its pharmacy income and margins were hit by “governmental agencies seeking to minimise increases in the costs of healthcare, including pharmaceutical drug reimbursement rates”.
Boots closed a net one store during the year, ending the period with an estate of 2,485 outlets.
As part of a $1.5bn (£1.2bn) global cost cutting drive, WBA recently revealed that it was looking at the viability of some of its stores in the UK which could lead to the closure of underperforming sites. The group has already been taking “decisive steps” to cut costs in the UK in recent months as part of the restructuring programme to get itself back on track. This has included cutting jobs at Boots head office in Nottingham.
After a poor run of results, a new management team at Boots UK has been working to modernise its product offering and stores to win back shoppers. Earlier this year, Boots stated that it was looking to reinvent its beauty offering by removing traditional counters in 24 of its biggest beauty halls and replacing them with ‘trending zones’, ‘discovery areas’ and spaces for live demonstrations. The retailer is also introducing hundreds of new lines and beauty specialists in its stores who will be able to advise customers on its ranges.
NAM Implications:
- The need to counter rivals pricing actions and promotions…
- …is unlikely to go away soon.
- Cutting unprofitable branches will help…
- But best for NAMs to focus upon complementing Boots ‘replacement of traditional counters with ‘trending zones’, ‘discovery areas’ and spaces for live demonstrations via beauty specialists.
