WBA: subdued growth in Q1

Date : 09 January 2020

Walgreens Boots Alliance reported sales of US$34.3bn, up 1.6% in the first quarter ending November 30th 2019 (+2.3% at constant currency). Operating income declined sharply, down 27.6% to US$1bn.

Executive Vice Chairman and CEO Stefano Pessina described the performance as “soft”, but reiterated that the business remained confident in its long-term strategy.  

Challenging conditions dampen international performance

Retail Pharmacy USA

  • Sales and comparable store sales both up 1.6%
  • This performance was driven by a strong quarter for pharmacy, with higher brand inflation, prescription volume and growth in central specialty contributing
  • In contrast, retail sales declined -2.2% (impacted by store closures), with comparable sales down -0.5%. Reduced emphasis on tobacco reported as a key reason: excluding tobacco and e-cigarettes, comparable sales grew 0.8%. Core health and wellness categories performed well

Retail Pharmacy International

  • Sales decreased -5.4% (-2.7% on constant currency basis) Lower retail sales in Boots UK and lower sales in Chile, reflecting social unrest, were key factors
  • Comparable pharmacy sales grew 0.6% on a constant currency basis, driven by higher NHS reimbursement and increased sale of services.
  • Comparable retail sales declined -3.0% on a constant currency basis, attributed to the tough retail climate in the UK for Boots

Pharmaceutical Wholesale

  • Sales +5.2%, including an adverse currency impact of 3.0 percent. On a constant currency basis, comparable sales increased 8.3 percent, led by emerging markets and the UK, including a customer contract change in the UK

Promising start to cost transformation programme

WBA reported progress against its four strategic priorities, in particular highlighting additional opportunities beyond its US$1.8bn cost saving programme, required to unlock investment for new and innovative business developments in the future.

Boots UK: plans to transform operations

Boots has closed 28 of the 200 stores identified as part of the store optimisation review undertaken in 2019. James Kehoe, executive VP and CFO of Walgreens Boots Alliance, described how all major processes within the business are being reviewed in order to create a leaner and more effective model.

Results of Boots’ revamped beauty halls and the introduction of new brands are reportly in line with expectations.   

Partnerships central to WBA’s evolution

WBA highlighted the positive performance of the trial Kroger Express format, following recent news that it was extending its partnership with Kroger into sourcing. The roll-out of “Jenny Craig at Walgreens” is also set to reach 100 locations by the end of the month.

Record-breaking Black Friday

Walgreens’ online sales rocketed 45% year-on-year across Black Friday weekend. Walgreens is also driving greater traction via its app, up 12% to 60m downloads.

Boots also delivered a record-breaking Black Friday, with online sales increasing around 25% year-on-year.