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Boots’ parent company attributes losses to ‘worsening’ UK market

The UK’s lockdown measures were blamed for the financial impact on the business
The UK’s lockdown measures were blamed for the financial impact on the business

Boots' parent company has put a $1.6 billion (£1.3bn) operating loss primarily down to “deteriorated business conditions” in the UK market, including the impact of COVID-19.

The $1.6 billion (£1.3bn) operating loss for March-May this year compares to an operating income of $1.2bn (£940 million) for the same quarter a year ago, Walgreens Boots Alliance said in its latest financial report, published yesterday (July 9).

This drop is “mainly due to the no-cash impairment charges of $2 billion (£1.6bn) in Boots UK”, the company said, explaining that the worsening business conditions in the UK includes “the adverse impact of COVID-19 and resulting future uncertainty”.

It added that the UK is the market that has seen the “most significant COVID-19 impact”.

Lower footfall

The international retail pharmacy division – which includes Boots UK – saw sales of $1.9 billion (£1.5bn) between March and May, a 26% decrease on a constant currency basis. This drop was “mainly due to a 28% decrease in Boots UK sales as foot traffic in stores was severely disrupted by COVID-19 restrictions”, the company said.

Adjusted operating income for the division decreased by $308m (£240m), to an adjusted operating loss of $143m, (£113m). for March-May. This is a 192% drop compared to the $165m (£129m) adjusted operating income for the same period in 2019.

Adjusted gross profit decreased 36%, on a constant currency basis, reflecting “lower retail sales in Boots UK and lower retail gross margin, largely due to supply chain costs.”

Earlier this year, Walgreens Boots Alliance attributed a 2.5% drop in adjusted gross profit for December 2019-February 2020 to “lower retail sales and margin” in its UK pharmacies

Lockdown measures affect sales

Comparable retail sales for Boots UK decreased 48%, as “lockdown measures impacted high streets and shopping centers and compelled consumers to consolidate shopping into grocers”, the company said.

However, this decrease was “partially offset by a 78% rise in Boots.com sales, as the pandemic restrictions boosted online sales”, the company said.

Comparable Boots UK pharmacy sales decreased 1% on a constant currency basis, “reflecting lower prescription volume and reduced demand for services during the pandemic, mitigated in part by timing on NHS reimbursement”.

The estimated adverse COVID-19 impact on adjusted operating income for the international retail pharmacy division was $365m-$390m (£284m-£304m).

Wholesale sales rise

Meanwhile, the company’s pharmaceutical wholesale division – which includes Alliance Healthcare in the UK – saw sales increase by 5.3% on a constant currency basis compared with the same period last year, “led by the UK and Germany”, Walgreens Boots Alliance said.

James Kehoe, global chief financial officer of Walgreen Boots Alliance, said in a webcast yesterday that the group’s wholesale division “delivered yet another strong performance”.

“We were faced with significant footfall declines across most of our markets in retail pharmacy international and especially in the UK,” Mr Kehoe said, adding that this  was “only partly compensated” by much-faster growth from its online businesses.oots has now closed 76 of the 200 loss-making UK branches it announced last year that it would close or sell by September 2020.

The company also announced yesterday that it would reduce its Boots UK workforce by 4,000, but told C+D that these redundancies are “not expected” to affect pharmacists and pharmacy advisors.

5 Comments
Question: 
What do you make of the company's financial results?

Soon-To-Be Ex-Pharmacist, Superintendent Pharmacist

I think Covid-19 has been an absolute blessing, not even disguised, for the coprorates (an unintentional mis-spelling but I'll leave it there because it sort of sums them up) because they can now do whatever 'restructuring' they want to do and have planned to do for ages all while wringing their hands and blaming it on the pandemic.

Kevin Western, Community pharmacist

I have huge sympathy for the affected workers, and those in the future who will be affected. The company however deserves all it gets.. it has consistently undermined Community Pharmacy in the UK and reduced working conditions for Pharmacists, and their teams, which other employers have happily followed.
If the "great and good" of Boots are having a sleepless night or two... Tough!

Clive Hodgson, Community pharmacist

Totally agree Kevin,

Enormous sympathy for affected staff but zero for Boots.

Reap as you sow / Karma

If you have never done so please take time to read the article published in the Guardian (April 2016) entitled “How Boots went Rogue” by the investigative reporter Aditya Chakrabortty. Just “Google” it. 

It is free to view in full with no pay wall. Be sure to read the follow up articles and especially the responses to it by community pharmacists. I believe it attracted a record post bag.

Clive Hodgson, Community pharmacist

I doubt this is the end of Boots UK difficulties. A major review of their retail store portfolio has to be inevitable given the accelerating (and likely permanent) shift to online shopping. Many of their stores, especially the largest, must now be of doubtful long term viability.

And with this ongoing upheaval and change "Amazon Pharmacy" could have the perfect opportunity to disruptively enter the online Pharmacy market should they decide to.

Leon The Apothecary, Student

I agree with you there, Clive. I feel C19 has simply accelerated plans that were already in motion with a restructuring of Boots' assets. The other chains seemingly have similar plans, through internal rumour and watching what the companies have done in over the last year or so.

An online focus, even to my simple perspective, seems to be the way to go unless they wish to follow companies in other industries that refused to change.

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