UK’s Boots shines as WBA reports mixed results

Walgreens Boots Alliance reported its first-quarter results on Thursday and said that adjusted earnings per share fell by 43.1% to $0.66, reflecting challenging retail market trends in the US and a higher tax rate. But Boots UK was its star performer.

The total group operating loss was $39 million compared to a much larger loss of $6.2 billion in Q1 last year (linked to one-off charges in the year ago quarter). And adjusted operating income fell 33% on a constant currency basis to $687 million. The net loss was $67 million compared to a $3.7 billion loss a year ago. 

Q1 sales rose 10% however, reaching $36.7 billion, with sales growth in both the US Retail Pharmacy and International segments.

In US Retail Pharmacy, Q1 sales rose 6.4% to $28.9 billion and comparable sales increased 8.1%. But within that division, pharmacy was strongest while US retail sales fell 6.1% with comparable retail sales down 5%. Adjusted operating income was down 37.2% to $694 million.

The group’s International segment saw Q1 sales up 12.4% at $5.8 billion, including an 8% favourable currency impact. Sales rose 4.4% on a constant currency basis with Boots UK sales growing 6.2%. International adjusted operating income jumped to $142 million from $116 million. 

Boots had a great quarter with its comparable retail sales rising 9.8% and it seeing growth across all categories and formats. It increased its total retail market share for the 11th consecutive quarter as well. And the company’s webstore continued to perform strongly with sales growing 17.5% and accounting for more than 19% of total retail sales for Boots. 

Analysts were impressed. Tash Van Boxel, Retail Analyst at GlobalData, said: “Boots has reported an impressive set of Q1 results. Beauty and haircare were standout categories driving this uplift, up 11.4% and 10% respectively, as the introduction of new professional and salon haircare brands enabled Boots to capitalise on consumers investing in a more premium element to their haircare routine. 

“The key driver of growth has been the focus on price, with skincare and healthcare own-brand products proving popular among shoppers. Indeed, consumers are still trading down to cheaper own brand alternatives across both essential and non-essential categories and Boots is in a good position to capitalise on this continuing trend.

“The Black Friday period proved instrumental to Boots’ performance as store sales increased 7% during Black Friday week as consumers took advantage of price drops. Promotions within fragrance, electrical beauty, skincare and premium beauty appealed the most, with consumers using the promotional period to restock their beauty must-haves and trial items as an extra treat. Christmas gifting was also a priority for shoppers during Black Friday.

“Amid the ongoing threat of Sephora since its return to the UK in 2023 and subsequent third store opening scheduled for later this year, Boots’ new concept store in Battersea will be one to watch and something it should expand upon if it proves a success. These specialised beauty stores will ensure that it can better compete with the likes of Sephora and Space.NK, both of which have the upper hand over Boots given the broad range of niche and sought-after brands they offer.”