Boots shines for WBA but US retail struggles

Walgreens Boots Alliance released its Q4 and full-year results on Tuesday and the owner of the UK’s Boots chain as well as the Walgreens US business made a loss in both periods that ended 31 August.

The Q4 net loss was $3 billion, wider than the $180 million loss in the prior year with one-off effects denting the figure. The adjusted net loss was down 41% to $340 million, reflecting lower adjusted operating income. Sales in the quarter increased 6% year-on-year to $37.5 billion.

For the year, the net loss was $8.6 billion, up 180.4% year-on-year. Adjusted net earnings were $2.5 billion, a decrease of 27.9% on a constant currency basis. Sales for the period increased 6.2% to $147.7 billion.

The company also said it’s announcing a “footprint optimisation programme” — or store closures in simpler language — that’s targeting around 1,200 closures over the next three years, including approximately 500 in fiscal 2025.

Looking at the details of key parts of the business, the International division of which Boots is a major part had Q4 sales of $6 billion, an increase of 3.2% from the year-ago quarter. Sales increased 3.7% on a constant currency basis, with the German wholesale business sales growing 8.2% and Boots UK sales growing 2.3%.

Comparable retail sales at Boots increased 6.2% compared to the year-ago quarter, with growth across all categories. Boots.com continued to perform strongly with sales growing 19%, representing 15% of Boots total retail sales.

But adjusted operating income fell 10.9% to $231 million, mainly due to lapping real estate gains in the year-ago period.

In US Retail Pharmacy Q4 sales rose 6.5% with comp sales up 8.3%. But retail sales there fell 3.5% and comparable retail sales dropped 1.7%, “reflecting a challenging retail environment and continued channel shift”. That said, Retail margin was positively impacted by the category mix and higher owned brand penetration, partly offset by elevated shrink levels.

Back with Boots, analysts hailed its strong performance. Tash Van Boxel, Retail Analyst at GlobalData, said: “Boots’ momentum has continued this quarter, driven by the appeal of its beauty and healthcare essentials among holiday-goers. Boots is a destination for luxury and lower price point health & beauty, using its loyalty scheme to bolster customer retention, with a 4.5% increase in new member sign-ups for the Boots Advantage Card. Value for money and own-brand offers remain integral as consumers seek lower prices via members’ pricing, discounts, and perks, such as building up points for future purchases.

“Boots’ continued success within beauty supported its retail division performance. Boots has launched 55 new beauty brands throughout FY2023/24, solidifying its position as the UK’s health & beauty market leader as it wards off threats from beauty specialists Sephora and Space.NK. 

“The broadening of its beauty offer should ensure that Boots stands out from its competitors, highlighting [its] willingness to stay up to date with current trends.”