Boots sales fell again in Q2 but it gained premium beauty share

By

Sandra Halliday

Published
Apr 3, 2020

Walgreen Boots Alliance reported better-than-expected Q2 results this week with sales up 3.7% to $35.8 billion, although operating income fell 18.7% to $1.2 billion. Adjusted operating income fell 12% to $1.7 billion.

But the US-based company was held back by its UK health and beauty retail giant Boots and said it faced “a challenging UK market” during the quarter.

The company said sales fell 1.7% in Retail Pharmacy International, although the problems at Boots weren’t the only issues as civil unrest in Chile and a decline in Chinese tourists to Thailand also had an impact.

On a conference call, the company said that at Boots, UK comparable retail sales fell “4.6% in a declining UK market. Overall we held market share in our categories”. But adjusted operating income was down 24%, it added without stating the monetary amount. This was mostly due to lower retail sales volume and margins in the UK.

The company is conducting “end-to-end operating model reviews” across all of its businesses and this includes store closures for Boots, with 40 out of the planned 200 having already shut. 

But its main actions have been focused on boosting premium beauty and digital at Boots and this seems to be having an impact. It said it continued to gain market share in premium beauty in the quarter, and introduced nine new beauty brands, including Huda Beauty, taking its total number of new brands to 48.

It also “successfully digitalised the Boots Advantage Card, which now has 1.2 million users and accelerated usage of the Boots app, with downloads increasing 76% in the quarter versus last year”. The app now has 3 million active users, which it believes makes it the largest pharmacy health and beauty app in the UK. 

Boots.com also continued to see strong growth with sales up 23% in the quarter. 

Of course, Covid-19 could dent this progress. The firm is mainly focused on its healthcare offer at present and the work it does with the NHS and said that in March, its UK sales declined by around 8%. Mid-single-digit growth in pharmacy didn’t offset a mid-teens decline in retail sales. But it said it’s “the exit trends that are concerning. Retail sales declined by 65% over the last 10 days as high street foot traffic reduced significantly and consumers diverted spending away from discretionary products”. 

That said, it’s “confident that this is a temporary situation and we would expect to see some stabilisation of sales trends over time, given that our pharmacies are designated essential services and are therefore among the few retail locations remaining open. Once the restrictions are removed, we will rapidly reopen our 600 stores and expect a reasonably quick recovery”.