WBA closing 200 stores in UK and reviewing US

WBA closing 200 stores in UK and reviewing US
Many of the stores earmarked for closure are loss-making or within walking distance of another Boots store, says James Kehoe, global chief financial officer of Walgreens Boots Alliance

2 July 2019 - Deborah Wilkes

Walgreens Boots Alliance (WBA) is closing around 200 Boots stores in the UK. The news came as the US-based company announced that sales at Boots UK had fallen by 1.0% at constant currencies in the three months ended 31 May 2019 in a "challenging market".

James Kehoe, WBA's global chief financial officer, said the store-optimisation programme would "impact around 200 locations over the course of the next 18 months".

Many of the 200 stores were loss-making, commented Kehoe, and approximately two-thirds were within walking distance of another Boots store.

Kehoe pointed out that the stores earmarked for closure represented around 8% of Boots UK's store base but only 1% of revenue.

There was unlikely to be a significant impact on staff, he added, as WBA planned to redeploy them to nearby stores.

Kehoe noted that WBA was also reviewing its "real estate footprint in the US", and "accelerating the pace of change, especially in its US supply chain".

Financial results announced

In the three months ended 31 May 2019, which is the third quarter of the company's financial year, WBA reported sales of USD34.6 billion. This represented a rise of 0.7% as reported compared to the same period a year earlier. Sales were up by 2.9% at constant currencies.

The company said the rise was primarily due to growth in the Retail Pharmacy USA and Pharmaceutical Wholesale divisions.

Made progress in the quarter

Executive vice chairman and chief executive officer Stefano Pessina said WBA had "made progress" in the third quarter following a "difficult" second quarter.

"That said," commented Pessina, "the pressures we have seen for some time continue to impact our businesses, and we still have a lot to do to deliver the transformation that will allow us to get ahead of the market trends again and return our company to strong and consistent growth."

Pessina added that the impact of WBA's current initiatives would not be "fully reflected" in the company's financial performance until future financial years.

Reporting WBA's second-quarter results in April 2019, Pessina said the quarter had been the "most difficult" since the formation of the company at the end of 2014 (click here to read the News story).

In the third quarter ended 31 May 2019, WBA's largest division – Retail Pharmacy USA, which houses the Walgreens and Duane Reade chains – reported sales up by 2.3% to USD26.5 billion.

Excluding the impact of store optimisation following the acquisition of Rite Aid stores, sales growth was 2.9% on an organic basis.

Sales down 1.0% at Boots UK

The Retail Pharmacy International division reported sales down by 7.3% to USD2.77 billion. On a constant currency basis, sales were down by 1.6%.

The decline, said Kehoe, was mainly due to a 1.0% decline at Boots UK in a "challenging market".

Kehoe said adjusted operating income at the division had fallen by 10.5% due to "weak retail sales and lower pharmacy margins in the UK".

"Our UK pharmacy business was impacted by temporary industry-wide NHS underfunding and higher generic pricing," commented Kehoe, adding that these impacts had been "only partially offset by prescription volume growth".

Kehoe said WBA was "taking actions to address our UK cost base".

The division also encompasses Boots in Thailand, Norway, Ireland and the Netherlands, as well as Benavides in Mexico and Ahumada in Chile.

The Pharmaceutical Wholesale division, which mainly operates under the Alliance Healthcare brand, recorded sales down by 1.7% to USD5.87 billion in the quarter. On a constant currency basis, sales increased by 8.3%.

WBA's operating income was down by 24.7% to USD1.20 billion, while adjusted operating income was down by 11.7% to USD1.7 billion.

In the nine months ended 31 May 2019, worldwide sales at WBA rose by 4.9% to USD103 billion. Growth at constant currencies was 6.8%.

WBA describes itself as the "first global pharmacy-led, health and wellbeing enterprise".

The US-based company says that – together with the organisations in which it has equity method investments – it has more than 18,500 stores in 11 countries as well as wholesaling interests in more than 20 countries.

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