Boots, the renowned health and beauty retailer based in the UK and owned by Walgreen Boots Alliance, has encountered a difficult market in the second quarter, leading to a decline in sales. Despite this, the company has managed to see growth in its premium beauty sector.
In the second quarter, Walgreen Boots Alliance reported results that exceeded expectations, with sales reaching $35.8 billion, marking a 3.7% increase compared to the previous year. However, there was an 18.7% decrease in operating income, amounting to $1.2 billion, and an adjusted operating income drop of 12% to $1.7 billion. The decline in operating income can be attributed to lower sales volume and margins in the UK market.
Boots faced a decline in sales volume in the UK, resulting in a 4.6% decrease in comparable retail sales. To tackle this challenge, Walgreen Boots Alliance has undertaken comprehensive operating model reviews and has already closed 40 out of the planned 200 Boots stores. However, the company has also implemented strategies to boost its premium beauty offerings and enhance its digital capabilities.
Despite the overall decline in retail sales, Boots has managed to increase its market share in the premium beauty segment. The company has introduced nine new beauty brands, including Huda Beauty, bringing the total number of new brands to 48. Additionally, Boots has successfully digitized its Boots Advantage Card, which now boasts 1.2 million users. The Boots app has experienced a remarkable 76% increase in downloads compared to the previous year, with 3 million active users, making it the largest pharmacy health and beauty app in the UK. Sales on Boots.com have also witnessed strong growth, with a 23% increase in the second quarter.
However, the ongoing COVID-19 pandemic may pose a challenge to Boots’ progress. The company is currently focusing on its healthcare offerings and its partnership with the National Health Service (NHS), which resulted in an 8% decline in UK sales in March. Although pharmacy sales saw mid-single-digit growth, retail sales experienced a decline in the mid-teens. The decline in foot traffic and consumer spending on discretionary products are major concerns for the company.
Despite these challenges, Walgreen Boots Alliance remains confident that the decline in sales is a temporary situation. Since Boots pharmacies are considered essential services, they have remained open during the pandemic. Once restrictions are lifted, the company expects a swift recovery and plans to rapidly reopen its 600 stores.