Walgreens Boots Alliance has “slow” start to year

Walgreens Boots Alliance has “slow” start to year
Trading conditions in the UK were “soft”, says Stefano Pessina, executive vice chairman and chief executive officer of Walgreens Boots Alliance

9 January 2020 - Deborah Wilkes

Walgreens Boots Alliance (WBA) had a “slow” start to its new financial year, according to executive vice chairman and chief executive officer Stefano Pessina.

Pessina put the slow start down to a competitive pharmacy environment in the US and soft trading conditions in the UK.

WBA reported sales of USD34.3 billion in the three months ended 30 November 2019, which is the first quarter of the company's financial year.

This represented a rise of 1.6% as reported compared to the same period a year earlier. Sales were up by 2.3% at constant currencies.

The result compares with increases of 1.5% as reported in the quarter ended 31 August 2019 and 0.7% in the quarter ended 31 May 2019 (click here to read the News story).

Performance by division

In the latest reporting period, WBA's largest division – Retail Pharmacy USA, which houses the Walgreens and Duane Reade chains – reported sales up by 1.6% to USD26.1 billion. The company said sales in comparable stores were also up by 1.6%.

WBA’s Retail Pharmacy International division reported sales down by 5.4% to USD2.75 billion. On a constant currency basis, sales were down by 2.7%.

Retail Pharmacy International had been hit by a “challenging UK market”, commented WBA, noting there had been “lower retail sales in Boots UK and lower sales in Chile, reflecting social unrest”.

James Kehoe, WBA's executive vice president and global chief financial officer, said Boots UK’s comparable retail sales had declined by 2.9%, as the UK high street remained very challenging. However, he pointed out that the company had held market share in a declining UK retail market.

Kehoe noted that Boots UK had “rebalanced” 200 stores and introduced 20 new UK beauty brands, as well as announcing an exclusive franchise agreement with Mothercare in the baby category.

Furthermore, WBA plans to launch a health and beauty retail business in Indonesia through a partnership with local lifestyle retailer PT Mitra Adiperkasa (MAP) (click here to read the News story).

Adjusted operating income at Retail Pharmacy International was down by 39.1% to USD79 million.

The Pharmaceutical Wholesale division, which mainly operates under the Alliance Healthcare brand, recorded sales up by 5.2% to USD6.01 billion in the quarter.

WBA and McKesson recently agreed to combine their pharmaceutical wholesale businesses in Germany. WBA will have a controlling 70% stake in the joint venture, with McKesson owning the remaining 30% (click here to read the News story).

Progress with divisional optimisation

Commenting on the progress with divisional optimisation, Kehoe said WBA had completed 114 of the 200 Walgreens store closures and 28 of the 200 Boots UK closures.

Pessina said: "We are confident our strategic plans are the right ones to drive long-term sustainable growth going forward."

WBA's operating income was down by 27.6% as reported to USD1.01 billion, while adjusted operating income decreased by 15.6% as reported to USD1.46 billion.

US-based WBA says that – together with the organisations in which it has equity method investments – it has more than 18,750 stores in 11 countries as well as wholesaling interests in more than 20 countries.

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