Source: GettyImages

The share price of Boots owner Walgreens Boots Alliance slumped this week after the global pharmacy group downgraded earnings and revealed plans to shut 450 stores in the UK and US.

The group slashed its full-year earnings per share guidance to $4.00-$4.05, down from $4.45-$4.65, due to performance being hit by a slowdown of pharmacy sales post-Covid, and a “cautious macroeconomic forward view”.

Total third quarter sales increased 8.6% year on year to $35.4bn, driven by growth in its core pharmacy operations. But US retail sales fell 0.2% against expectations of growth, as it faced lower tobacco sales and fewer OTC test kits.

The group also fell to a $500m operating loss in the quarter, which reflected a $431m non-cash impairment of assets in Boots UK.

The performance drove the group to raise its cost savings target from $3.5bn to $4.1bn by 2024.

As part of that drive, it announced 450 further store closures – including 150 outlets in the US and 300 stores in the UK.

WBA said it wanted to optimise its retail locations, and many of the closures affected stores that geographically overlap.

However, Boots itself posted strong third quarter numbers, despite the push to cut its UK store numbers from 2,200 to 1,900.

It posted sales growth of 13.4% for the three months ended 31 May 2023, marking its ninth consecutive quarter of market share growth.

The chain said the number of transactions was up both in store and online, as footfall grew ahead of the wider retail market. City centre flagship and travel stores delivered the biggest increase, while digital sales also continued to grow, up 25.2% year on year.

Beauty, especially skincare, was the star performer – sales shot up over 18% year on year, driven by in-house brands.

Danni Hewson, head of financial analysis at AJ Bell, praised the UK chain’s “stonking performance”, noting its online business is “finally delivering on its promise”. “Boots as a business has emerged from the pandemic invigorated, relevant and relatable. It’s got to know its customer, has got a strong store footprint and its shelves are finally full of stuff that customers want to buy at a price they’re willing to pay.”

Tash Van Boxel, Retail Analyst at GlobalData, added: “As footfall continues to increase at Boots, especially in its city centre flagship locations and travel shops, the retailer must ensure good stock availability across its store estate to enable it to keep up with consumer demand for health & beauty items.”

Walgreens Boots Alliance shares fell 9.3% back to $28.64 on the profits warning – the stock’s lowest level for more than a decade.