Multibillion-pound sale of Boots is shelved after shares plunge in US parent company
boots pharmacy
The struggling US owner of Boots has shelved plans for a multibillion-pound sale for the second time, leaving the high street chemist at risk of a further squeeze on investment in its stores.
Walgreens, which has owned Boots since 2014, abandoned plans to cash in as it revealed a damaging profit warning on Wednesday.
The trading update, which also announced plans to close a large number of stores, saw its share price fall to its lowest level since 1997.
Boots was an isolated bright spot for the $10bn (£7.9bn) group, and chief executive Tim Wentworth said he would retain ownership of the retailer as he attempts to overhaul the business.
He said: “Our review of Boots UK showed that we have attractive options to unlock value in this business.
“While we believe there is significant interest in Boots at the right time, its growth, strategic strength and cashflow remain key contributors to the company.
“We are committed to continuing to invest in Boots UK and find innovative ways for this business to fulfil its potential.”
The decision will spark fears that Boots stores could face closure or miss out on upgrades. Walgreens has already shut 650 Boots stores in the UK and has faced criticism from staff and customers for underinvestment.
It will also fuel speculation over the future of chief executive Seb James, who has been at the helm since 2018 and had previously been promoting the retailer’s chances of listing in London.
Bosses at Walgreens said Boots’ stores remain “key contributors” to the business. In its latest update, Walgreens said overall sales at Boots were up 1.6pc over the third quarter, while digital purchases were up 13.8pc year on year.
However, this was not enough to prevent Walgreens from slashing its profit forecast for the year, which led to its share price tumbling by 25pc – its biggest one-day fall since 1980.
This led to the company announcing plans to close a significant number of underperforming stores in the US as it scrambles to cut costs.
Last year, the group announced plans to find cost savings of up to $1bn, which consists of a commitment to close around 650 Boots stores in the UK. It said 484 have already been shuttered as of February this year, leaving it with 1,900 in total.
Overall, Walgreens recorded sales of $36.4bn over the past three months, which represented an increase of 2.5pc.
That was despite retail sales falling by 4pc amid a “challenging US retail environment”.
Mr Wentworth said, said: “The bottom line is that I am confident that [Walgreens] will be a leader in the future of healthcare with pharmacy and retail at its centre.”
“But we also acknowledge where we are today, and what we need to do to realise our longer-term ambitions. The severity and duration of the challenges in the operating environment have only added urgency.”
Walgreens first bought the 175-year-old business in 2014 and had previously attempted to offload it in 2022.
Sale plans were then reignited earlier this year, with Mr Wentworth claiming in January that “everything is on the table” regarding the future of Boots.
A City investment banker said private equity firms have been looking at Boots for the past few months, particularly as the prospect of a London listing fell away. However, they described the retailer as an unattractive proposition given its vast real estate portfolio.
“What do you do with all that space?” the banker said, who stressed that a large number of stores would require significant investment.
Another City banker said: “The question all buyers were asking was what has changed since last time. And the short answer is, not a lot.”
Sign up to the Front Page newsletter for free: Your essential guide to the day's agenda from The Telegraph - direct to your inbox seven days a week.