Boots sees UK profits slide amid tough competition
today May 14, 2019
High street health and beauty chain Boots has blamed intense competition and the highly promotional retail environment for a 18.3% decrease in UK profits to £317 million, as its parent company considers the possibility of store closures.
According to its latest accounts, sales at the retailer’s UK business fell by 2.3% to £6.8 billion last year, and the number of active loyalty card users fell from 14.6 million to 14.4 million shoppers.
The chain is owned by US company Walgreens Boots Alliance, which last month admitted it is looking at a number of cost-saving measures including closing stores in a bid to save $1.5 billion (£1.2bn) in annual costs by 2022.
Boots has come a long way since the opening of its first store in Nottingham in 1849, and the business is now the largest pharmacy-led health and beauty chain in the UK with almost 2,500 stores and 56,000 employees.
In February it announced plans to cut up to 350 jobs at its headquarters in Nottingham to reduce decision making time and improve efficiencies. Commenting about the restructuring in February, managing director Seb James said: “Like all retailers, we are operating in a new environment in which customers need us to move much faster and recognise that they want to shop differently.”
Kate Ormrod, a retail analyst at GlobalData, agreed: “While Boots is a stalwart of the high street, the brand is in need of modernisation to drive appeal among younger shoppers and build its future customer base – particularly crucial amid the rise of online pureplays, and rival Superdrug’s strong youth engagement.”
The company has already begun working on its ‘cool factor’ by announcing earlier this month a deal to stock Fenty Beauty by Rihanna, and will launch a further 20 new cult brands over the next six months. Twenty-four of its UK beauty halls have also been refreshed in line with new customer behaviours, and will feature ‘discovery areas’ and live demonstration areas instead of traditional beauty counters.
“This is undoubtedly worthwhile given that stores have felt unloved for some time, however this will impact just 1% of its store estate, muting its ability to fully revitalise its brand image – making a swift rollout of successful elements essential,” continued Kate Ormrod from GlobalData.
“The health & beauty specialist had ample opportunity and impetus to kick start a new strategic direction years ago so while its new strategy is sound, Boots could have been reaping its rewards for some time.”
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