Boots chain in focus after news of parent's cost-cut plan
today Dec 21, 2018
This week’s news that sales fell at Walgreens Boots Alliance and that the firm is seeking $1 billion in cost savings has shone the spotlight firmly onto the UK beauty and health chain Boots and could see it responsible for a huge chunk of the cuts.
The parent company on Thursday reported falling profits and while half of the earnings drop was due to to exceptional items and calendar shifts, the other half was due to the tough UK market conditions.
The UK chain, which was founded in 1877, became part of Walgreens Boots Alliance only in 2014 and so is now part of a giant international group with nearly 19,000 stores and a workforce of more than 0.4 million people.
Boots brought with it major beauty brands including No7, Liz Earle, Soap & Glory and Botanics and a prominent position in the UK beauty sector both for its physical shops and its webstore.
But while Boots improved its UK makes share in the last quarter, this was "more than offset by a very weak retail environment". That meant retail sales at the chain excluding its pharmacy ops were down as much as 2.6%.
The US-based parent company had also blamed lower UK beauty sales for a disappointing performance outside of the US in the previous quarter so its patience is clearly running low.
Walgreens hasn’t specified how it will save costs at its UK arm but has said that its $1 billion+ target is a three-year one for the group as a whole and will involve digitising existing operations. The company said “the digitalisation of Boots is a huge opportunity” for growth.
Although the company operates in 11 countries, its cost-cutting measures will begin in the UK and US and as the focus will be that digital drive, analysts have assumed that job cuts will be part of the programme.
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