UK’s Boots is standout performer for Walgreens Boots Alliance in Q4

The parent company of the Boots and Walgreens chains has had plenty of big news this week with Wednesday’s announcement of its new CEO Tim Wentworth being followed up on Thursday by its latest set of results.

And those results show the group has plenty of work to do before its back to full health, even though it’s moving in the right direction, but that the UK Boots chain has really turned itself around. 

Q4’s operating loss was $450 million compared to an operating loss of $822 million in the year-ago quarter. Adjusted operating income was $683 million, a fall of 9.8% on a constant currency basis, reflecting lower volumes of Covid-19 vaccinations and testing. That’s unsurprising given how health is a huge part of the business that’s also heavily beauty-focused.

The net loss was $180 million compared to a net loss of $415 million a year ago. Adjusted net earnings decreased 17.1% to $575 million.

So that’s the losses. But how did sales do? Q4 sales increased 9.2% to $35.4 billion, up 8.3% on a constant currency basis.

Interim CEO Ginger Graham said the performance this year “has not reflected WBA’s strong assets, brand legacy, or our commitment to our customers and patients. In just six weeks, we have taken a number of steps to align our cost structure with our business performance, including planned cost reductions of at least $1 billion, and lowered capital expenditures by approximately $600 million. We anticipate seeing the impact of these actions in fiscal 2024, beginning in the second quarter.”

So what happened at key parts of the business in Q4? US Retail Pharmacy sales rose to $27.666 billion in the quarter from $26.683 billion. But adjusted operating income there fell to $554 million from $786 million. While Pharmacy sales rose, Retail sales fell 4.3% and comparable retail sales decreased 3.3%.

In its International segment it was a very different picture as sales rose to $5.784 billion from $5.144 billion in the quarter. Adjusted operating income rose to $259 million from $163 million.

Sales increased 6.7% on a constant currency basis, with Boots UK sales growing 10.9%, and the German wholesale business sales growing 3.5%.

Boots UK comparable retail sales increased 11.7%, with growth across all categories and footfall improving 4%. Boots.com continued to perform strongly with sales growing 28.9%, representing over 13% of Boots total retail sales.

Analysts were impressed by Boots. Tash Van Boxel, Retail Analyst at GlobalData, said: “[The] performance in its final quarter has rounded off an impressive year. While much of this can be attributed to an improvement in footfall, the health & beauty specialist’s focus on improving stock availability enabled Boots to capitalise on this increase in visitors.” Indeed, GlobalData figures showed Boots’ retailer usage for summer holiday shopping rose 1.8ppts to 31.5% of shoppers purchasing this category in 2023. 

She added: “Boots’ appeal is in part due to the strength of its loyalty scheme, with the number of active Advantage Card users at a three-year high as consumers make savings on key items such as suncream and skincare essentials. Indeed, 84.1% of consumers that are part of a health & beauty loyalty scheme are subscribed to Boots’ Advantage Card, making it the most popular retailer loyalty scheme in the sector, according to GlobalData’s August 2023 monthly survey.

“Skincare has been the best-performing category, with sales up 25% as Boots’ own brand ranges proved popular as shoppers traded down to lower price point alternatives. Premium beauty sales have also rocketed 20%, indicating success in navigating the polarisation of the cost-of-living crisis well, appealing to both high-income consumers as well as less affluent shoppers. With Boots’ new Battersea Beauty store forecast to open by 2024, premium beauty is anticipated to continue to drive growth in the next financial year.”