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Boots’ parent attributes 26% profit drop to ‘lower UK retail sales’

Boots’ parent company has largely blamed a 26% drop in adjusted gross profit in its international retail pharmacy division in the three months to August on “lower UK retail sales”.

Adjusted gross profits for the international retail pharmacy division – which includes Boots UK – dropped 26% for the June-August period, compared to the same quarter a year ago, Walgreens Boots Alliance said yesterday (October 15).

In its latest financial report, the company said the profit decrease, which was on a constant currency basis, “reflects lower UK retail sales, higher fulfillment costs, marketing investments to drive customer traffic and lower fixed supplier contributions”.

Reduced footfall in UK

Comparable retail sales for Boots UK decreased 29% on a constant currency basis, as footfall in stores “continued to be significantly reduced due to COVID-19, particularly in major high street, train station and airport locations”, Walgreens Boots Alliance said.

However, footfall “did improve steadily in the fourth quarter compared with the third quarter”.

The COVID-19 pandemic “continued to impact heavily on buying habits and consumers temporarily shifted purchasing to one-stop grocery shopping”, it added. sales rose 155%, however, compared with the same quarter last year, “partially offsetting the reduced footfall”, the company said

15% drop in sales

The international retail pharmacy division as a whole saw sales of $2.3bn (£1.7m), a 15% decrease, on a constant currency basis. This drop was “mainly due to a 17% decrease in Boots UK sales”, the company said.

Adjusted operating income decreased $197m (£150m), to an adjusted operating loss of $3m (£2.3m) for June-August

The estimated financial impact of COVID-19 on both operating income and adjusted operating income across the international retail pharmacy division was “approximately $300m (£232m),” the company said.

Pharmacy sales up

Comparable pharmacy sales for Boots UK “increased 0.4% on a constant currency basis, reflecting favorable timing on NHS reimbursement”, Walgreen Boots Alliance said.

This “mitigated the impact of lower prescription volume and reduced demand for pharmacy services during the pandemic,” it added.

Wholesale sales up

The company’s wholesale division – which includes Alliance Healthcare in the UK – saw sales increase 4.3% on a constant currency basis, compared with the same period last year, with sales of $6bn (£4.5bn).

Overall sales for the quarter across the whole of Walgreens Boots Alliance increased 2.3% to $35bn (£27bn), compared with the same period last year, but adjusted operating income across the group fell 27% on a constant currency basis.

The end of August was also the end the Walgreens Boots Alliance 2020 financial year, with adjusted operating income down 25%, on a constant currency basis, for the fiscal year. The company said it “estimates adverse COVID-19 impact of approximately $1.2bn (£1bn)” for this period.

What do you make of the fourth quarter financial results?

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