Boots, the pharmacy chain owned by US giant Walgreens Boots Alliance, is reported to be reviewing more than 200 of its UK stores as part of a plan to cut costs and reinvigorate profit growth.
With pharmacy revenues under pressure in both the UK and US, Walgreens said in April that it had taken “decisive action” to reduce UK head office costs and initiated a store portfolio review.
The declining competitiveness of its stores has for a while been masked by the huge procurement cost savings generated by Boots’ initial merger with Alliance UniChem and then its combination with Illinois-based Walgreens, which was fully completed in 2014, analysts say.
“We currently do not have a major programme envisaged, but as you’d expect we always review underperforming stores and seek out opportunities for consolidation,” a spokesman for the company said. More than 200 of its 2,485 UK stores were being reviewed for closure, Sky News reported.
“We are being realistic about the future and that we will need to be agile to adapt to the changing landscape,” the spokesman added.
Boots, founded in Nottingham in 1849, has traditionally been one of the most trusted brands on the UK’s high streets, especially among women, but other retailers have copied traditional footfall drivers such as lunchtime “meal deals”, while the beauty sector has begun to migrate online.
In addition to formidable competition from Superdrug, owned by Hong Kong based AS Watson, discounters and supermarkets have cut prices on personal goods like shampoo to lure customers into their own stores.
“There has been a gradual hollowing out of the company over the past few years,” said one analyst.
More recently, changes to the procedures under which the UK’s state-run health service reimburses pharmacies’ drug costs have also hit hurt profits. In 2018, rival Lloyds Pharmacies closed 190 outlets, citing the cutbacks as a factor.
In response to the sector’s changing dynamics, Walgreens appointed former Dixons Carphone boss Seb James as chief executive in late 2018. His plans include improving the customer experience in larger stores and offering more brands; last month, Boots began selling the Fenty Beauty range created by pop star Rihanna and plans to open a dedicated beauty store in London’s Covent Garden.
However, the company still has great defensive strengths. Its Advantage loyalty card is carried by over 17 million Britons while some of its own brands, such as tanning lotion range Soltan, are market leaders in their sector.
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