Boots online sales doubled in the second quarter of its financial year although the retailer’s total sales fell by 17.8% as the company felt the impact of Covid-19 restrictions. But the health and beauty company, ranked Elite in RXUK Top500 research, said that it had felt the impact of shoppers buying most of their purchases in supermarkets during lockdowns.
Online sales at the Boots UK business rose by 105% compared to the same time last year, helping to offset the effect of reduced footfall on the business. Nonetheless sales fell by 17.9% on a like-for-like basis that strips out the effect of store openings and closures.
The company said that it gained market share in the beauty category, but restrictions as a result of the pandemic hit all its other categories, reflecting the shift in buying habits to one-stop grocery shopping. Operating income at Boots fell by 24% to $106m (£76.6m). This, said parent company Walgreens Boots Alliance, as it reported second quarter figures, reflected “strict Covid-19 restrictions in the UK, partly offset by decisive cost management actions and strong Boots.com performance.”
The update came as parent company Walgreens Boots Alliance reported a 4.6% rise in sales to $32.8bn (£23.7bn) in the second quarter of its financial year, to February 28 2021, once £4.8bn (£3.5bn) in sales from discontinued operations were excluded following its sales of most of the company’s Alliance Healthcare business and some of its international retail pharmacy business in Europe. Net earnings from continuing operations were 6.3% up at $922m (£667m).
Walgreens Boots Alliance incoming chief executive Rosalind Brewer says the figures were well ahead of expectations, despite the impact of Covid-19. She says: “I will continue to review closely all our initiatives, strategies and opportunities to capitalise fully on the incredible potential in front of us. Our team will move swiftly and decisively to best serve the needs of our patients, customers and communities around the world at this critical time and beyond.”
Commenting, Mahya Agorlou, retail analyst at data and analytics company GlobalData, says the second quarter figures take Boots to a 13.9% retail sales decline in the first half of its financial year, although pharmacy sales rose by 2.8% over the same period.
She adds: “Covid-19 has also encouraged consumers to transfer their health and beauty spend to grocers, something warmly welcomed by the supermarkets. Sainsbury’s, for instance, has adapted floor space to incorporate 134 beauty halls and 48 wellness hubs offering over 1,000 health focused products. Hence, there’s now an increasing level of urgency for Boots to keep up with grocers in terms of look and feel. Boots’ tired-looking stores have long been criticised and, with additional pressure from other channels, Boots will find it increasingly difficult to justify such a large store portfolio as retail emerges from the pandemic. Furthermore, as other operators look to take share of the more consistent pharmacy market (most notably Amazon UK’s recent trademarking of “Amazon Pharmacy”), Boots must ensure its health and beauty retail proposition remains competitive, on price, range, and fulfilment options.
“Despite the challenges mentioned, there lies opportunity for Boots to poach premium end beauty consumers from ailing department stores. Boots, due to the portfolio of brands it stocks from everyday to premium cosmetics, is better placed to lure ardent beauty shoppers versus its direct high street competitor Superdrug and other grocers; however, it must act swiftly and address the ambience and experiential element of its stores if it is to strengthen its appeal. Boots can also protect market share through quicker reaction to changing consumer demands – particularly in sustainability.”
