Boots crisis deepens as US owner Walgreens announces plans to axe stores
Boots is facing an increasingly uncertain future as the crisis that is engulfing its American owner deepens.
In a bleak update to investors on Wall Street yesterday, Walgreens Boots Alliance announced plans to shut a slew of stores in the US due to woes at its pharmacy business there.
Shares in the drugstore giant, which has owned UK high street stalwart Boots since 2014, plunged 25 per cent to a 27-year low.
Earlier this month, Walgreens insisted that ‘all options are on the table’ as it considers whether to sell Boots or float it on the stock market as a stand-alone business.
The listing of its shares in London would be a major boost to the City amid concerns over the health of the UK stock market.
Closures: In a bleak update to investors on Wall Street yesterday, Boots owner Walgreens Boots Alliance announced plans to shut a slew of stores in the US.
But yesterday’s dismal results underlined the challenge facing Walgreens as it tries to sort out its US business – casting fresh doubt over its plans for Boots.
‘They have to do something at this stage,’ said Jonathan De Mello, boss of the JDM Retail Consultancy.
‘The future is uncertain but I imagine behind the scenes they are preparing for some kind of process.’ Walgreens did not specify how many of its 8,600 stores in the US would be axed – but it could be up to a quarter.
The business has struggled to compete with rivals on prescription drug sales and appointed new boss Tim Wentworth last October in a bid to turn its fortunes around.
It yesterday trimmed its profit targets for the current financial year, saying that it blamed ‘challenging pharmacy industry trends and worse-than-expected consumer environment’.
Speculation over the future of Boots, which counts actress Keeley Hawes as an ambassador for its No 7 range, has been building in recent years.
In 2022, Walgreens abandoned plans to sell the company due to an ‘unexpected and dramatic change’ in market conditions.
Private equity giants Apollo, TDR Capital and Sycamore made pitches but Walgreens later said that no one made an adequate offer.
Should Boots, which started out as a family herbal medicine shop in Nottingham in 1849, return to the UK markets, it would be a much-needed vote of confidence.
Last November, Boots sold its pension scheme to asset management giant Legal & General for £4.8billion, which paved the way for a potential takeover.
The deal, which was one of the largest of its kind, means it will be easier to sell.
Despite the gloom across the Pond, Boots said sales in the three months to May 31 were 6 per cent higher than a year ago.
Products including fragrance line Cosmic by model Kylie Jenner and beauty brands such as Sol de Janeiro and Byoma have been flying off the shelves.
Boots UK and Ireland boss Sebastian James said: ‘This is another set of consistently strong results for Boots.
'I am pleased to see our positive momentum continue across the whole business, with both retail and healthcare increasing sales and a thirteenth consecutive quarter of market share growth.’