Walgreens Boots Alliance, the parent company of Boots and Walgreens, made headlines this week with the appointment of its new CEO, Tim Wentworth, followed by the release of its latest quarterly results.
These results demonstrate that while the group is on the path to recovery, there is work to be done. However, the standout star in this performance is the UK-based Boots chain, which has undergone a remarkable turnaround.
In Q4, the operating loss reduced significantly to $450 million from $822 million in the same period last year. The adjusted operating income, accounting for a 9.8% decline on a constant currency basis, was $683 million, primarily due to decreased volumes in Covid-19 vaccinations and testing. It’s essential to note that health and beauty are integral parts of this business.
The net loss for the quarter was $180 million, compared to $415 million in the previous year. Adjusted net earnings decreased by 17.1% to $575 million.
But how did sales perform? Q4 sales saw a substantial increase of 9.2%, reaching $35.4 billion, an 8.3% growth on a constant currency basis.
Ginger Graham, interim CEO, acknowledged the need to realign costs with performance, aiming for cost reductions of at least $1 billion and lower capital expenditures by approximately $600 million. The effects of these actions are expected to be seen in fiscal 2024, starting in the second quarter.
In key segments of the business in Q4, US Retail Pharmacy sales climbed to $27.666 billion, while adjusted operating income dropped to $554 million. While Pharmacy sales rose, Retail sales fell by 4.3%, and comparable retail sales decreased by 3.3%.
The International segment showcased a different story, with sales reaching $5.784 billion, up from $5.144 billion in the same quarter. Adjusted operating income also rose to $259 million from $163 million. Sales saw a 6.7% increase on a constant currency basis, with Boots UK driving a 10.9% sales growth, and the German wholesale business experiencing a 3.5% growth.
Notably, Boots UK witnessed an impressive 11.7% increase in comparable retail sales, with growth across all categories and a 4% improvement in footfall. Boots.com continued to perform strongly, with sales growing by 28.9%, accounting for over 13% of Boots’ total retail sales.
Analysts were particularly impressed by Boots’ performance. Tash Van Boxel, Retail Analyst at GlobalData, noted that the health and beauty specialist had enjoyed a successful year, partly due to improved stock availability and a robust loyalty scheme. The Advantage Card, the most popular retailer loyalty scheme in the sector, saw a surge in active users, making significant savings on key items like suncream and skincare essentials.
Skincare sales surged by 25%, driven by Boots’ own brand ranges, which were embraced by cost-conscious shoppers. Premium beauty sales also saw a remarkable 20% increase, showcasing Boots’ ability to appeal to a wide range of consumers, regardless of income. With the upcoming opening of the Battersea Beauty store by 2024, premium beauty is expected to continue driving growth in the next financial year.
