Boots recorded further falls in sales and profits in its last quarter, although the declines were not as bad as those posted earlier in the pandemic.
First-quarter results to 30 November from parent company Walgreens Boots Alliance (WBA) showed total sales in its British chain were down 11.5% as shopper numbers continued to be reduced by the crisis, particularly in high street, train station and airport locations.
Like-for-like sales across its retail division slipped 9.1%, although this was an improvement on the 29.2% and 48% declines recorded in the previous two quarters. The group stated that a recovery in footfall trends in September and October was set back by the re-introduction of stricter restrictions in November. However, its online store continued to perform well with sales surging up 106%.
Boots highlighted that its market share decreased in all categories, except beauty. The business attributed this to the impact of the ongoing pandemic on consumer shopping habits and spending temporarily shifting as consumers favoured one-stop grocery shopping.
In the Boots pharmacy operation, like-for-like sales increased by 2.5% during the period. This was said to have reflected the favourable timing of NHS reimbursement, which mitigated the impact of lower prescription volume and reduced demand for pharmacy services during the pandemic.
WBA’s Retail Pharmacy International division as a whole saw quarterly sales fall 8.2% on a constant currency basis to $2.6bn (£1.9bn). Gross profit slipped 11.5%, reflecting the lower UK retail sales and higher fulfilment costs.
WBA expects growth in its UK business to return in the second half of the year with it also benefitting from its recent cost-cutting programme. However, the company cautioned that the current lockdown in the UK could hurt its business further in the short term.
The group announced this week that it had agreed a $6.5bn (£4.8bn) deal to sell the majority of its Alliance Healthcare distribution business to US pharmaceuticals wholesaler AmerisourceBergen in order to focus on improving the performance of its struggling retail operations.
Meanwhile, WBA’s group results showed total sales up 5.7% to $36.3bn (£26.7bn), reflecting robust growth in its Retail Pharmacy USA (+3.9%) and Pharmaceutical Wholesale (+16.3%) units. Adjusted operating income declined 9.9% year-on-year to $1.3bn (£960m).
WBA stated that it expects the benefits from Covid-19 vaccinations to cushion the impact of pandemic-induced restrictions, and stuck to its full-year earnings growth forecast, sending its shares up over 5% yesterday.
Chief Executive Stefano Pessina said: “Our first-quarter results exceeded expectations as we continue to deliver on our strategic priorities.
“As announced yesterday, we have taken a major step forward in our transformation; we are divesting our pharmaceutical wholesale business with plans to use the proceeds to accelerate our investments in healthcare.
“While the business environment remains challenging, we are rising to the occasion with agility and discipline and we are confident in our outlook for adjusted EPS for the fiscal year.
“Our role in the healthcare system has never been more important as the communities we serve continue to turn to our trusted brands and expert pharmacists.”
NAM Implications:
- Key will be the extent that ‘shopping disrupters’ (social distancing, queues) will cause a ‘permanent‘ change in shopping behaviour.
- i.e. why queue twice for groceries and H&B if a single trip to Tesco covers most options.
- In terms of online, a 106% increase helps, but think Amazon…
- …especially if Bezos decides to introduce his US healthcare initiatives in the UK?
- NAMs need to reassess the appeal of Boots to its core users in the light of the above.
