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Lloydspharmacy: Plans to close ‘small number’ of unviable branches

COVID-19 pandemic had greatest impact on UK business, according to Lloydspharmacy's parent company
COVID-19 pandemic had greatest impact on UK business, according to Lloydspharmacy's parent company

Lloydspharmacy is proposing to close a “small number” of community pharmacies following “increasing financial pressures” from factors including COVID-19, the multiple has told C+D.

The effect of the pandemic, the impact of business rates and changes to pharmacy funding are among the factors that have led to the decision, the multiple said when it told C+D yesterday (August 5) that it is “proposing to close” some branches “that are no longer commercially viable for us to operate”.

Lloydspharmacy will aim to “retrain and redeploy as many of our talented colleagues as possible to other vacancies that exist,” a spokesperson for Lloydspharmacy’s parent company McKesson UK said. Further details about the closures are not currently available.

Profits “offset” by COVID-19

The news comes after the McKesson group earlier this week (August 3) announced that a 3% profit increase across its European business in the first quarter of the 2021 financial year was “partially offset” by the pandemic.

Adjusted operating profit for McKesson’s European pharmaceutical solutions division – which includes Lloydspharmacy and the wholesaler AAH –was $36 million (£27.4m) in the three months leading up to June 30.

This was a 3% increase on the same period the previous year, once currency rates had been taken into account, McKesson said in its latest financial report published on Monday (August 3).

This growth was “driven by lower operating expenses” but was “partially offset by lower volumes due to the pandemic”, McKesson executive vice president and chief financial officer Britt Vitalone said. The first three months of the 2020/21- financial year were “very difficult” and “the COVID-19 pandemic had a greater impact on our UK operations than the rest of our European operations”, he added.

“Our teams have adapted to a changing operating environment in the wake of COVID-19. We saw increased demand prior to the lockdown with material reductions after the [stay at] home orders were imposed,” Mr Vitalone said.

Revenues down

Revenue for the European business was $6.2 billion (£4.7bn), down 4% once currency rates were taken into account. This was also “driven by the negative impact of the pandemic on the pharmaceutical distribution and retail pharmacy businesses”, Mr Vitalone said.

Meanwhile, revenue across the whole McKesson group was  $55.7 billion (£42.4bn), “flat year-over-year, as market growth and higher volumes from retail national account customers within the US pharmaceutical and speciality solutions segment were largely offset by the impact of lower prescription volumes and primary care patient visits across the enterprise”, McKesson said.

Presenting its fiscal 2020-21 outlook in May, McKesson predicted a 20-25% drop in adjusted operating profit across its European pharmaceutical solutions division, which it partly blamed on the “severe social restrictions” in the UK over COVID-19.

18 Comments
Question: 
What do you make of this announcement?

Leon The Apothecary, Student

Lloyds is very inefficient as a business on the ground level, and it has appeared to be a constant challenge for them. One example is their claiming process; many of their branches don't have an EPS scanner, so to claim a single prescription is a slow process compounded by Compass, a piece of software so bad it should have been retired many, many years ago.

H W, Community pharmacist

Awful, awful software. Even ones WITH a scanner require you to scan an "issue" barcode between prescriptions. There's also no option to just "dispense" a prescription, it's either claimed or not which leads to a lot of accidental claims - which on the surface sounds dodgy but I am convinced it's Compass being useless, not staff pumping their store numbers.

Leon The Apothecary, Student

I've seen then! They tend to be this crumpled old thing. The software requires them to have a separate daemon to logon to the spine, and then a further separate software to interpret the data.

Why Lloyds has not yet pushed their PMR "Upgrade" to Pharmacy Manager yet is beyond my comprehension. 

H W, Community pharmacist

Duplicate 

Suplex City, Locum pharmacist

F

Alexander Dale, Dispenser Manager/ Dispensing Assistant

Is that a genuine F or (as I suspect) an F(/s)?

Callum Armstrong, Community pharmacist

Yes, but if carrying out that business results in a loss, then all they are doing is giving away losses to their competitors.

J RP, Community pharmacist

They can sell the shop, that would make a few hundred thousand at least. I'm hearing of shops that turn over near £1 million closing. Theres no harm in selling these if the only competition are other pharmacy chains, as customers wont have the option of going to a nearby Lloyd's so they will literally gain nothing and lose everything. Rowlands put up lots if shops openly stating they were making a loss for sale. People bought these for a few 100 thousand. Lloyd's are closing shops I am certain are making some kind of profit and can be worked with.

J RP, Community pharmacist

Amazes me that Lloyd's are closing certain shops rather than selling. I'm hearing of shops closing where there is no nearby Lloyds pharmacy for customers to go to, meaning they are giving away business to competitors.

Leon The Apothecary, Student

To sell a business you need a buyer, and I suspect the number of people looking to buy business right now are quite slim.

Not-So-Lucky Ex-Locum, Superintendent Pharmacist

Apparently pharmacy sales are buoyant (according to a pharmacy selling company, so take it with the seasoning of your choice) but anyone would have to be a mug to buy a pharmacy right now. I wouldn't touch one of them with a bargepole. WAY too much uncertainty to take the risk.

J RP, Community pharmacist

The floor for funding has been reached, they can only cut so much. I'd happily invest in a pharmacy over property or the stock market these days

Not-So-Lucky Ex-Locum, Superintendent Pharmacist

I'm afraid I don't share your optimism that the cutting floor has been reached. I think they will dig a whole new trench very soon. The only investment worth anything these days seems to be gold, and that has topped out as well. Might just as well sleep on your money if you have any.

J RP, Community pharmacist

You'd be surprised. Those with liquid cash before the pandemic would be licking their lips at opportunities like this to expand. Again I'm certain that owner operators would make some of these shops work. Take out pharmacist and locum costs, cut staff hours and do the work yourself and most of these shops will suddenly be profitable. Then as owner operator grow the business yourself.

Not-So-Lucky Ex-Locum, Superintendent Pharmacist

This sounds so simple but what it equates to is 'Work yourself like a dog, never take a break, age prematurely and die very shortly after taking early retirement because you can't stand it any more'

J RP, Community pharmacist

Said who? You can work 6 days a week 50 weeks a year as owner operator, it's your business after all! Any other business owner at the beginning would do this as the minimum. Seems to me pharmacists expect to make 6 figure salaries just checking boxes. If Lloyd's were to make these shops available to all buyers I guarantee owner operators would be willing to pay above the price a multiple or independent chain would. A shop turning over 600k can easily return 100k net for owner operator with correct buying and staffing, depending on rent and rates being cheap enough.

Not-So-Lucky Ex-Locum, Superintendent Pharmacist

Trouble is, with your business model, where do you fit in that thing called a 'life'? I don't think there is a pharmacist in the entire country making six figures just checking boxes btw. In order to do that, you have to be in a different sector entirely.

J RP, Community pharmacist

you've missed my point. A business owner can expect no life at the beginning, it is a business after all! I know of shops local to me closing that could well be made to work by owner operators with the mind to have it managed and run in the not so distant future. You wont make 6 figures just checking boxes, but as an owner operator of just a decent shop you can. Trouble with pharmacists is they think they are entitled to 6 figures for a 4 year doss degree (I've done it) and a pre reg exam (again have done it and passed with ease).

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