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Category M clawback blamed for Boots' sales loss

Boots UK reported flat performance in the three months to November

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%.

“Flat” performance

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.

What impact has the cat M clawback had on your pharmacy?

Sharon Stone, Communications

Its a funny thing that Stefano Pessana used to espouse every business he get involved with acheives double digit growth ( what a narcissist !!! ) . But now he's happy with "flat performance " . Losing your touch Pessina  ???, best be careful Boots gets rid of old stock.

Brian Worley, Academic pharmacist

Regarding the loss of profit for Boots, and other large plcs, has been partly due to

the huge prices they have all paid to buyout existing pharmacies.  Now we have a surplus in pharmacists they can factor this in to make their accounts look better.

Jonny Johal, Pharmacy Area manager/ Operations Manager

Walgreens made a bad investment?

Brian Austen, Senior Management

I also expect Alliance Healthcare to look at benefits of exporting to their US operations to gain from the £/$ exchange rate

Brian Austen, Senior Management

You can be sure that Boots will be looking at 'non-performing' chemists with a view to closure and redundancies once the establishment payment reductions and other cuts have an impact.

Valentine Trodd, Community pharmacist

Yeah, better make sure you hit the magical 400 this year or you'll be performance managed out!

Meera Sharma, Community pharmacist

Not sure there's going to be a lot of sympathy for this decline in profits!

Frustrated Pharmacist, Community pharmacist

Don't think there'll be too many tears shed by pharmacists nationwide regarding Boots profit decrease of 2.7%

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