Category M clawback blamed for Boots' sales loss
The latest category M clawback has been blamed for a 0.5% decrease in Walgreens Boots Alliance's international pharmacy sales, C+D has learned.
In its financial results, published last week (January 5), the health and beauty giant said the sales decrease was “primarily due to a reduction in government pharmacy funding in the UK”.
However, C+D learned today (January 9) that Boots has specifically attributed the loss to the £48 million reduction in category M payments between June and September 2016.
The results, for the first quarter of the 2017 financial year, measure the company's performance in the three months up to November 30, 2016 – one day before the government's £113m cut to pharmacy funding in England came into force.
Walgreens Boots Alliance's retail pharmacy international division, which includes Boots UK, reported adjusted gross profit decrease of 2.7%, which it attributed "primarily to lower margins in the UK".
The 0.5% sales decrease, compared to the same period last year, “was partially offset by growth in other international markets”, it added.
Its wholesale division, which mainly consists of Alliance Healthcare, reported sales of £4.5bn ($5.4bn), a 6.5% decrease on the same period the previous year.
However, the company said its "comparable sales" for the division had increased 4.7%.
Boots UK’s performance was "flat" when compared with the same period last year, but there was “notable growth” in its optician business, Walgreens Boots Alliance said.
Overall sales for Walgreens Boots Alliance fell 1.8% to £23.5bn ($28.5bn) in the three-month period of the report.
Walgreens Boots Alliance chief executive Stefano Pessina said the group is “pleased with the progress” and he expects growth in the second half of the 2017 financial year, because of the company's “new strategic pharmacy partnerships”.
The company said in the report that it does not provide profit “estimates on a forward-looking basis”. It told C+D it is unable to speculate on how Boots UK's performance will be impacted as the funding cuts in England continue to bite.
Last November, Boots told C+D it had “not achieved the [performance] level required” to give staff a bonus for 2016.
Lloydspharmacy parent company Celesio has also predicted its earnings will fall in the wake of category M clawbacks.