With the race to acquire Boots entering the final stages, latest figures from its parent Walgreens Boots Alliance (WBA) show the health & beauty retailer has continued to bounce back from the effects of the pandemic with a strong uplift in sales across its stores and online operations during its latest quarter.
Over the three months to 28 February, total sales at Boots UK climbed 15.2% after recovering from the significant declines last year when its high street and travel sites were impacted by lockdowns, and shoppers turned to supermarkets for their health & beauty needs.
Like-for-like pharmacy sales rose 3.6%, reflecting stronger demand for its pharmacy services such as flu vaccinations and Covid testing which drove sales up 75%.
The main retail business saw like-for-like sales jump 22.0%, with the group claiming it made market share gains across all categories, led by beauty. The period saw the reintroduction of its value-oriented Boots 17 beauty range and the launch of the Boots Price Advantage programme for holders of its loyalty card.
The retailer benefitted from a 52% increase in footfall in its stores, although it noted that traffic was still below pre-Covid levels, partly due to the Omicron surge that took place early in the second-quarter period.
Meanwhile, its online business continued to perform well, with sales in the quarter up 60% compared to pre-pandemic levels two years ago. Highlighting the shift to online, sales from Boots.com accounted for over 15% of its retail sales in the quarter, compared to pre-Covid levels of 9%.
On a constant currency basis, sales in WBA’s entire International division rose 7.5% to $5.6bn, reflecting the recovery in the UK market and 2.5% growth in its German wholesale business.
In WBA’s core US operation, second-quarter sales increased only 1.2% to $27.7bn, held back by a decline in the AllianceRx Walgreens business. However, like-for-like retail sales in the Walgreens chain jumped 14.7% and pharmacy sales increased 7.3%.
For the group as a whole, sales from continuing operations increased 3.0% (+3.8% constant currency) to $33.8bn. The performance reflected the sales growth at Walgreens and in the International division, and sales contributions from its Walgreens Health business due to the recent acquisitions and consolidation of VillageMD and Shields, partly offset by the decline in sales at AllianceRx Walgreens. Adjusted operating income from continuing operations came in at $1.7bn, an increase of 35.9% on a constant currency basis.
WBA said its “strategic review” of the Boots business was progressing as it looks to focus on the lucrative US healthcare market. Recent reports suggest the race to buy the retailer has whittled down to two serious contenders – US buyout giant Apollo Global Management and Asda’s owners TDR Capital and the Issa brothers. With the next round of bids due to be submitted this month, the management at Boots is believed to have recently met with the prospective buyers.
However, it was reported this week that floating Boots as a standalone business is not off the table if private equity firms do not put forward a suitable bid.
“Boots continues to bounce back strongly from the pandemic and delivered another solid performance this quarter, with sustained retail and pharmacy sales growth and market share gains across all categories,” Sebastian James, Managing Director of Boots UK & ROI said yesterday.
“Our strategic focus continues to be on transforming our beauty, healthcare and digital offerings and this quarter we made excellent progress – with strong take-up of our new and existing healthcare services while maintaining our leading position in the growing beauty category.”
Looking ahead, James said that Boots was “uniquely positioned to capture further growth through the combination of our broad and rejuvenated store portfolio and increasingly powerful online presence.” He also highlighted that the business was ideally placed to “seize the opportunities presented by the growing healthcare and beauty markets.”
It is thought that private equity firms hope to extract value from Boots by investing in primary healthcare services and striking partnership deals with the NHS to turn some of its 2,200 stores into medical hubs where services could include blood tests, vaccinations, and physiotherapy.
NAM Implications:
- Boots well on the way back…
- Three options remain on the table re its future:
- Sale to Apollo Global Management
- Sale to Asda’s owners TDR Capital and the Issa brothers
- Floating Boots as an independent business
- Meanwhile, suppliers can benefit by working with Boots’ focus on transforming their beauty, healthcare and digital offerings.
- This will help Boots to drive turnover and thereby optimise their value in the market.
- Meaning less pressure on the new owners to justify the purchase price.
