Boots blames ‘weak market’ and pharmacy payments for 35% profit drop
Boots UK saw a 34.6% drop in its adjusted operating income for September to November, in comparison with the same period last year.
Parent company Walgreens Boots Alliance blamed “approximately half of the decline” on “weak UK market conditions and the balance due to exceptional items and phasing”, including selling off its cosmetic and pharmaceutical manufacturing business Boots Contract Manufacturing last year.
It also referred to a “change in loyalty accounting” and the “timing of pharmacy payments”, in its latest financial report, published today (December 20).
Pharmacy sales down
Pharmacy sales dropped 3.5% in September-November 2018, compared with the same period last year.
The decrease was primarily driven by “temporarily higher prices in the prior year caused by shortages of certain generic drugs” in the UK, Walgreens Boots Alliance global chief financial officer James Kehoe told journalists during a conference call this afternoon.
Retail sales in Boots branches also fell by 2.6%, the company said.
“Improved Boots UK market share performance was more than offset by a very weak retail environment,” the company said.
Mr Kehoe referred to “weak” sales across the whole of Walgreens Boots Alliance’s retail pharmacy international division – which includes Boots UK – from September to November, which recorded a 3.6% decrease on a constant currency basis.
However, the trend is improving, Mr Kehoe claimed, referring to Boots UK’s online sales increasing “in the low teens”.
“We expect significantly improved performance in [the] coming quarter,” he added.
Alexander Gourlay, Walgreens Boots Alliance’s co-chief operating officer, said Boots’ performance continues to be affected by “the government...working to take items off the national formula...and asking customers to pay for it over the counter”. This “again contracts volume”, he added.
However, “the digitalisation of Boots is a huge opportunity” for growth, Mr Gourlay stressed.
Wholesale sales rise
Meanwhile, Walgreens Boots Alliance’s wholesale division – which includes Alliance Healthcare in the UK – saw sales increase by 6.6% compared with the same period last year, “with continued strong growth in emerging markets”.
Overall sales for the quarter across Walgreens Boots Alliance increased 9.9%, to $33.8 billion (£26.7bn), compared with the same period last year.