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Boots sees fast growth in online spending, but in-store sales are down

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Boots sees fast growth in online spending, but in-store sales are down

Online sales at boots.com were 23% up in the second quarter of its financial year, even before the outbreak of Covid-19 put it on the frontline of retail. But overall Boots UK sales were down by 1.2%, compared to the same time last year. Within that, pharmacy sales were 1.8% up, while Boots UK retail sales were down by 4.6%, evidence of lower in-store sales.

 

“Overall,” said its owner, the Walgreen Boots Alliance, in today’s second quarter trading figures, “the business held share in its categories in a declining market.”


The strong online growth reflects Boots’ parent company’s strategy of focusing on digitalisation, while transforming and restructuring its retail business and cutting costs. Other initiatives include a partnership with LIVI to provide video GP services and access to the Boots pharmacy.


The update comes as the Walgreens Boots Alliance reported second quarter sales of $35.8bn – up by 3.7% (+4.1% on a constant currency basis) on the same time last year – and operating income of $1.2bn, 18.7% down on last time. Operating income from its international division, which includes Boots, was down by 31.4% on the same time last year at $132m.

 

Walgreens Boots Alliance executive vice chairman and chief executive Stefano Pessina said: “During these unprecedented times of global uncertainty, Walgreens Boots Alliance is on the front lines of combating the COVID-19 pandemic. Our number one priority is to continue to provide essential services, products and information at this critical moment of need, demonstrating our unwavering commitment to our customers and patients, and to our people.”


The group said it was too early to say what Covid-19 would mean for the business.

 

Commenting on the figures, Kate Ormrod, lead retail analyst at data and analytics business GlobalData, said the figures covered the three months immediately prior to the serious outbreak of Covid-19.

 

She said: “For some time Boots UK has posted dismal quarterly performances, so though the Q2 result is not unexpected, the comparable retail sales decline does emphasise weak festive trading. While Q2 brought lower prescription volumes in the UK, comparable pharmacy sales were boosted by higher NHS reimbursement, giving Boots a second consecutive quarter of growth.”


The company gave further detail in an analyst call.

 

Ormrod said: “Walgreens Boots Alliance did reveal that UK sales fell by 8% in March, with pharmacy achieving mid-single digit growth, while retail sales posted a mid-teen decline. Its stores have been deemed essential by the UK government, and therefore will remain open during lockdown until at least Easter; however Boots stated that retail sales have fallen by 65% over the last 10 days, highlighting the reduced footfall and appetite for spending on non-essential categories such as fragrance, which Boots has also stopped selling online.

 

“With consumers concerned about unnecessary shopping trips, many will be diverting health and beauty spend to the grocers either in-store or online, ensuring Boots must focus on product availability and fulfilment to drive sales during the pandemic.

 

“Though the duration and impact of Covid-19 is unknown, it has undoubtedly forced Boots to veer off track strategically, with its extensive plans to resurrect the UK retail business in jeopardy given consumers’ reduction in spending.”

But she said that Boots was not expected to have any difficulty in winning customers back after the pandemic. "While the retailer is notably assisting the UK government in testing NHS workers for the virus, the public health crisis brings the focus back to the local community, and affords Boots the opportunity to showcase its credentials as a trusted retailer and healthcare provider,” said Ormrod.

 

Boots is a Leading retailer in RXUK Top500 research.

 

 

Image courtesy of Boots

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