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As Boots gears up to open its new London flagship, we round up the retailer’s latest developments.

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Walgreens Boots Alliance reported 4.6% sales growth to $34.5bn and operating income was down 23.3% to $1.5bn for Q2 2019, which ended 28th February 2019.

US: poor performance offset by Rite Aid acquisition

Retail Pharmacy USA experienced 7.3% growth in Q2 sales to $26.3bn, compared with the same period a year ago, the result was driven by the acquisition of Rite Aid stores. Excluding the benefit of Rita Aid Stores, LFL sales grew 1.6% in Q2.

  • Pharmacy sales accounted for 71.9% sales in the division, an increase of 9.8% compared with Q2 2018, primarily a reflection of higher prescription volumes driven by acquired Rite Aid stores
  • For the retail division, sales grew 1.3% but LFL sales were down 3.8%. This result was predominately driven by a weak cough, cold and flu season, weaker seasonal marketing and a continued shift from selected products such as tobacco
  • Operating income for Q2 declined 12.6% to £1.2bn compared with the same period a year ago

International performance: weak performance continues

The Retail Pharmacy international business experienced Q2 sales of $3.1bn, a decline of 7.1% compared with Q2 2019. On a constant currency basis sales were down 1.2%.

  • The result was hindered by a 1.3% decline in Boots UK, a reflection of the challenging retail market. For Boots UK, LFL sales in pharmacy dropped 1.5% and for the retail division LFL sales were down 2.3%. In light of this result, Boots has announced it is taking steps to cut costs and subsequently warned over closures of poor performing UK stores
  • Operating income decreased to $192mn, a decline of 22.6% compared with the same quarter a year go

Pharmaceutical wholesale

Pharmaceutical Wholesale experienced Q2 sales of $5.7bn, a decline of 0.3% compared with Q2 2018.

On a constant currency basis, sales grew 9.1%, a reflection of growth in emerging markets and the UK.

Outlook: focus remains on strategic priorities

WBA announced its continued commitment to its existing transformation priorities, which have recently gained momentum by a number of senior level appointments.

  1. Accelerate digitalisation of the company: WBA is on track with its digital transformation programme, which has been boosted by key partnerships
  2. Transform and restructure retail offering: the retailer is investing heavily in its store and range proposition. In the UK, focus will be on revamping its beauty halls and range innovation in the category
  3. Create neighbourhood health destinations: WBA continues to innovate in services, boosting its store proposition and developing health hubs for local communities
  4. Transformational Cost Management Programme: the business has increased its annual cost savings target from in excess of $1bn to in excess of $1.5bn by FY2022

 

Want to know more?

Retail Analysis subscribers can read and download our latest insight on Walgreens Boots Alliance here.

Opening Retail Week Live, Judith McKenna, CEO Walmart International refused to be drawn on its future ownership of Asda. The merger with Sainsbury’s is “still in the process, we’re working with the CMA (Competition and Markets Authority), and we’ll see what the road ahead is when they publish their next papers” she stated. McKenna shared her belief that Asda has put together a “fair and reasonable proposal” to enable the merger to be delivered to benefit British consumers. Reiterating Walmart’s international strategy of strong local businesses powered by Walmart, she reconfirmed her objective to position Asda for long-term success.

Addressing Retail Week Live with her opinions on the “Future of Work”, McKenna discussed the integration of technology into the Walmart business, and her view that there are three priorities for retailers:

  • Public engagement: having a real conversation with the public around digital evolution, listening to their fears and telling positive stories
  • Reimagining education and training: the need for businesses to commit to life-long learning and supporting their workforces to transition into new roles created alongside enabling technology. Walmart see this as a partnership, with governments and education bodies
  • Make work more inclusive: being proactive to actively create new, equal opportunities

Waitrose: ranging and online update

Waitrose & Partners' MD Rob Collins provided an update on its ongoing range review process, on plans for Waitrose.com once the Ocado supply agreement ends and on Waitrose’s long-term outlook.

Collins stated 24 categories have now been reviewed, with plans to do 70 more before the end of 2019. Waitrose aims to remove complexity and duplication from its ranges, but in keeping with its strategy to “be close to its most loyal customers” it will keep products listed if data shows they are purchased disproportionately by frequent and main Waitrose shoppers.

On its online plans, Collins reiterated the Ocado relationship had “been a commercial one”, and that it has been very consciously strengthening Waitrose.com by investing 20% of its discretionary capital on it over the last five years. Waitrose.com grew at 14% last year (now accounting for 5% of Waitrose sales) and it plans to double this over the next five years. Customers who shop at Waitrose.com spend four times more in total across the full Waitrose & Partners portfolio than those who do not.

On its future plans, Collins stated his belief that the “supermarket industry is going through a period of change”, and he “fundamentally disagrees that the answer is scale”. Waitrose & Partners is not concerned with “only having 5% of the market”. Waitrose, Collins said, is “comfortable in its own skin” and that its current operating margin of 3.2% is a “very sustainable level for us”. He sees an increasing polarisation between “the function of shopping and experience of shopping”, and Waitrose will focus on delivering its shoppers value over price.

Boots: four take outs

Seb James, SVP, President and MD of Boots, has been in role since September 2018, having joined from Dixons Carphone. Four take outs from his presentation at Retail Week Live were;

  1. Boots needs to lever the asset of its heritage, not let it be a “straitjacket”: it is 170 years old this year, and the opportunity is to build on the trust the brand has (second most trusted UK healthcare brand after the NHS) rather than living under a “heritage asset shadow” that prevents development.
  2. The Boots Brand Guidelines need to be relaxed: by constraining how brand owners can execute in Boots stores, Seb feels Boots has “become less relevant to its customers and suppliers”.
  3. There are three clear elements to the Boots business: these are helping customers to get better, to live well and to look great. In 2019 Boots will be adopting a more missions-based approach to its retail proposition to reflect these different elements, as customer demographics and behaviour is very different in each.
  4. There will be new format Boots retail stores launched in H2 2019, based around missions and with a more differentiated Beauty proposition. Seb stated that Boots has “got behind the curve” on beauty retailing. Consumers are less brand loyal and are increasingly influenced by social media, so Boots needs to create a new retail experience, with the aim to be the “global leader in personalised beauty”.

We share our highlights from Glamour Festival 2019.

Boots partnership: showcasing its new strategy

Boots worked with Glamour magazine, it’s partner of 12 months, to host Glamour Beauty Festival 2019. The festival ran from 8th - 10th March at London’s Saatchi Gallery.

The partnership aligns with Boots’ current strategy to modernise its beauty business, the event provided a great opportunity to demonstrate its new focus.

The Boots zone brought its beauty transformation plans to life, showcasing new branded range additions and enabling guests to experiment with these products, hear from branded representatives and get a feel for the new store concept.

This out-of-store activity is a tactic we've seen used successfully by beauty specialists such as Sephora, as they seek to create a buzz around their brand and offer more than just a shopping experience.

Brands that featured in the Boots zone included Becca cosmetics and Isle of Paradise, as well as grocery brands from its food-to-go offer such as Deliciously Ella and Just Water.

Guests were encouraged to sign up to Boots Advantage card and for those that are already members, loyalty vouchers entitling Boots advantage card holders to 200 points on their next shop were dotted around the area. This provided a great way to drive footfall, reward engaged shoppers and recruit new loyalty members.

Boots Advantage card sign ups
Source: IGD Research

Lifestyle brand: rewarding engagement with free samples

The atmosphere was tailored to the event demographic, feeling very young and on-trend.

There were countless snap and share opportunities, an in-house DJ, bright lighting and brands offering a number of Intagrammable spaces.

Boots was offering a complimentary gift of choice to guests that were willing to follow it on instagram.

Many brands were doing similar, as well as encouraging guests to take pictures and use various hashtags on Instagram.

Brands were also running competitions at the event, encouraging guests to sign up to newsletters or for a chance to win prizes or free treatments. This is a great opportunity to collect valuable data on a brand’s target demographic (questions involved everything from age and gender to beauty concerns), to benefit future engagement and influence communications.

Brand competitions
Source: IGD Research

Services: leading with experience

The festival was segmented into zones, dedicated to; make-up, skincare, hair, fragrance and wellness. Each zone housed brand-led services, available to event guests.

One of our favourites was a skin-based testing service from Caudalie, which provided personalised information on skin type and recommended products based on results.

Skin-based testing service by Claudalie
Source: IGD Research

Following the test, we were provided with a 10% discount on recommended products, a great incentive to spend.

The services offered engagement touch points throughout the event, helping brands to educate, inspire and engage with guests.

 

Want to know more?

Retail Analysis subscribers can read and download our latest insight on Drugstores here.

Maddie Malone

Maddie Malone

Research Analyst

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Presentations

09/01/2019
We review Walgreen Boots Alliance's performance in the US, UK and beyond. We examine progress against the retailer's strategic priorities, covering topics including cost efficiencies, customer experience, alliances and omnichannel retailing.
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19/09/2017
Find out how to improve the visibility of your products online through effective imagery.
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Key presentations

We review Walgreens Boots Alliance's retail outlook over the next five years and the key markets to watch.

This in-depth guide to the United Kingdom explores the key trends in grocery retail and the growth strategies of the leading retailers in the country.

An essential summary of trading priorities, latest developments, and other key commercial insights for Walgreens Boots Alliance .

We've developed a single, universal methodology for calculating food and consumer goods retail data, supported by our programme of primary and secondary research. This makes Retail Analysis the most reliable and robust source available for data of this type. 

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