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Boots blames ‘weak market’ and pharmacy payments for 35% profit drop

Generics pricing and shortages contributed to a 3.5% drop in pharmacy sales
Generics pricing and shortages contributed to a 3.5% drop in pharmacy sales

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.

7 Comments
Question: 
Have generics prices and shortages affected your pharmacy sales?

John Ellis, Community pharmacist

Pharmacy cuts will only harm patients in the long run. If a socialised healthcare system is not adequately funded, it will breakdown and be gobbled up by something ugly, unfair, and extortionate in price.

Define Offensive, Primary care pharmacist

From the Times:

'The American owner of Boots has made its UK retail business a focus of a new $1 billion cost-cutting drive after a further deterioration in its financial performance.

Walgreens Boots Alliance said yesterday that it had initiated “global smart spending and smart organisation programs” focusing on the UK, its American pharmacies and other “global functions”.

Walgreens said its cost-cutting programme aimed to save more than $1 billion a year by the end of the third year. It will involve digitising existing operations, among other measures. '

https://www.thetimes.co.uk/article/boots-owner-plans-1bn-cost-cutting-drive-l8whm2gz5

More cutbacks incoming to an already chronically understaffed, under-resourced, under-appreciated and overworked sector. The ship is sinking (or already sunken)! Everybody get out of community asap!

Richard MacLeavy, Non Pharmacist Branch Manager

It is interesting that they mention "significant restructuring" as part of the cost savings in the Times article. I wonder if this will include store closures. Their stores are typically high street locations with a mixed business of retail and pharmacy, however high street retail is in deline and pharmacy items are ever gravitating towards surgeries and the pharmacies located within the nearest proximity. The reality is that their business model is no longer fit for todays times. These pressures come on top of their self inflicted wounds which similarly show no sign of appeasement.

Kav Singh, Community pharmacist

Furosemide 13p......lets hold onto it.......price is now £3.00.....sell sell sell.......cha ching $$$££$$$££$£

Dave Downham, Manager

Phasing? Wtf?

A B, Community pharmacist

They don't mention anything about their "contracting volume" being down to their pharmacies refusing to dispense medicine they can't get from Alliance. Have had many patients come in for items they tried to get at Boots but were told they were unavailable even though they were in stock at pheonix, AAH, sigma etc.

N O, Pharmaceutical Adviser

"""Wholesale sales rise"""

That says it all. Don't just blame cat M, you are also responsible for holding the stock and then sky rocketting the prices of generics, I think so.

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