Boots’ US owner to review 2500 stores after its “most difficult quarter”

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Boots
// Walgreens Boots Alliance plans to close down stores following difficult quarter
// It is reviewing 2500 stores
// Q2 like-for-like sales dropped 2.3% in UK retail

Boots’ parent company Walgreens Boots Alliance has said the health & beauty retailer needs to close stores and cut more costs after its “most difficult” quarter.

Walgreens is taking “decisive steps” on UK cost cuts and is currently reviewing its physical stores in around 2500 sites.

The company will be searching for the weakest performers in terms of stores, and will find “opportunities for consolidation”.

Boots’ success is currently overwhelmed by the rise of discount supermarkets such as Aldi and online retailer Amazon.

However, it is not yet confirmed as to how many stores are due to close.

In its latest quarter – the period to February 28 – Walgreens saw a 2.3 per cent drop in like-for-like retail sales at its Boots fascia.

However, the company said its UK retailer was not the worst performer as its underlying net earnings fell “only” 8.9 per cent.

Walgreens now forecasts underlying profits to remain flat rather than go up seven per cent to 12 per cent, as previously predicted.

“The market challenges and macro trends we have been discussing for some time accelerated, resulting in the most difficult quarter we have had since the formation of Walgreens Boots Alliance,” chief executive Stefano Pessina said.

“During the quarter, we saw significant reimbursement pressure, compounded by lower generic deflation, as well as continued consumer market challenges in the US and the UK

“We are now expecting roughly flat adjusted earnings per share growth for fiscal 2019.

“We are going to be more aggressive in our response to these rapidly shifting trends. We are focusing on our operational strengths and addressing weaknesses, making a number of senior appointments to bring change and accelerating the digitisation and transformation of our business.

“This will include expediting the execution of our partnership initiatives, fully developing our in-store neighbourhood health destinations, re-imagining our front end retail offering, optimising our store footprint and increasing the annual savings goal.”

Meanwhile, Walgreens’ retail pharmacy division experienced a sales decrease of 7.1 per cent to $3.1 billion (£2.3 billion) in the second quarter.

Sales decreased 1.2 per cent on a constant currency basis, mainly due to a 1.3 per cent decline in Boots UK.

Moreover in the UK, comparable pharmacy sales decreased 1.5 per cent and comparable retail sales decreased 2.3 per cent, with Boots UK broadly maintaining market share amid weakness in its categories.

Its pharmaceutical wholesale sector recorded second quarter sales of $5.7 billion (£4.3 billion), a decrease of 0.3 per cent from the year-ago quarter, due to an adverse currency impact of 9.4 per cent.

On a constant currency basis, sales increased 9.1 per cent, primarily reflecting growth in emerging markets and the UK.

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