Spotlight on WBA, plus US and UK retail

In its latest results, Walgreens Boots Alliance announced that fiscal 2021 sales from continuing operations rose by 7.5% on a constant currency basis to US$132.5bn, exceeding expectations. In Q4 fiscal 2021 (June-August 2021), sales increased by 11.8% to US$34.3bn.

  • United States had Q4 sales of US$28.8bn, up by 6.6%. Retail sales grew by 6.5%. Comparable sales were up 8.1%, reflecting an 8.9% rise in comparable pharmacy sales and 6.2% growth in comparable retail sales. Excluding tobacco & e-cigarettes, sales increased by 7.2%, reflecting broad-based growth across all categories. In particular, health & wellness sales were 14% ahead, aided by cough / cold & flu, at-home Covid tests and vitamins.
  • International sales rose by 61.8% to US$5.5bn, including a favourable currency impact of 9.2%. Sales were up 52.6% (CC), including higher sales associated with the formation of the company’s wholesale j-v in Germany. Excluding this, sales rose by 9.3% (CC), reflecting the ongoing recovery in the UK market, where Covid restrictions were lifted in July 2021. Boots UK comparable retail sales were up by 15.0%, with footfall on the high street recovering although still below pre-Covid levels. Boots.com continued to perform ahead of expectations, with digital sales in Q4 more than doubling vs pre-Covid levels.

Both the US and UK CHC markets struggled for growth in the MAT Q2 2021 period – as per the chart below – but there were signs in the WBA results of a strong recovery in retail pharmacy sales in both markets in July and August 2021.

WBA has also announced its new consumer-centric healthcare strategy to drive sustainable, long-term growth. The plan features the launch of Walgreens Health, a technology-enabled care model powered by a nationally-scaled, locally-delivered healthcare platform. Walgreens Health will bring equitable, personalised, healthcare to communities across USA in-store, at home, in the doctor’s office and via a mobile app. WBA’s aim also includes reimagining retail through expanded health & wellness offerings and mass personalisation; accelerating WBA brands and digital offerings; and expanding the Transformational Cost Management programme.

In addition, WBA has increased its ownership stake in VillageMD from 30% to 63% to advance its strategic position in the delivery of value-based primary care, a fast-growing segment of the healthcare system. The US$5.2bn investment will accelerate the opening of at least 600 Village Medical at Walgreens primary care practices in 30+ US markets by 2025 and 1,000 by 2027, with more than half of those practices in medically underserved communities. 

Now is your final chance to enter our Nicholas Hall’s CHC Marketing Awardstaking place during our APAC e-Conference 2021 on 23 November! If you wish to put your brands in the spotlight, enter your campaign before 22 October. To find out more about this online meeting or awards criteria, please contact elizabeth.bernos@NicholasHall.com.

Update on Walgreens Boots Alliance deal

otcinaction

Since the global financial crisis, mega dealmaking has gone out of fashion but could now be making a comeback with Stefano Pessina’s planned leveraged buyout of Walgreens Boots Alliance, described as potentially the “largest private equity deal on record”, according to the UK Financial Times. Days after it emerged that Walgreens Boots Alliance had held preliminary talks with private equity groups regarding a potential US$70bn deal to go private, shares in the US-based company rose again on reports that KKR had made a formal approach.

Pessina has a 16% stake in the company and already teamed up with KKR to take Alliance Boots private in 2007, though this time there is a far more challenging amount of debt to be raised in the high-yield bond market, which will be a test of market appetite for a deal of this magnitude. Nicholas Hall commented: “Last week I wrote about the possibility of WBA’s delisting from the stock market and going private: “The general view is that this deal is just too big; and yet, and yet!” Seems I was right to be cautious about writing off what might be Stefano Pessina’s magnificent swansong and the world’s largest private equity deal.”

WBA.jpg

Walgreens Boots Alliance is the global leader in the retail pharmacy sector, operating just under 20,000 stores in 11 countries and recording revenues of US$136.9bn in the year to end-August 2019. WBA’s US retail pharmacy business accounts for 76% of this total, but operating income has declined by 20.5% owing to drug reimbursement pressures and increased competition from Walmart and Amazon. In addition, WBA’s international retail pharmacy business reported weak growth owing to a “challenging UK market”. According to a report in Forbes, the advantage of going private would be a chance to arrest the decline in WBA’s share price, down nearly 10% this year, as the deal would take the company away from the public eye and could make it easier to focus more on pharmacy point-of-care services.

Separately, under an agreement with Mitra Adiperkasa (MAP), a leading lifestyle retailer in Indonesia, WBA is to create a Boots branded pharmacy-led, health & beauty retail business in one of the world’s most populous countries. The first stores are expected to open in H2 2020. “Boots is a great addition to our diversified brand portfolio, which will help MAP further unleash the power of its 360° retailing strategy,” said Group CEO, VP Sharma. “We are confident that the combination of Boots cutting-edge products together with MAP’s solid competitive advantages will elevate the unique Boots experience to a whole new level in Indonesia.”

Announcing Nicholas Hall’s Reports End of Year SaleUp to 25% off – valid until 31 December. We are pleased to announce a special End of Year offer for our CHC Reports! Until 31 December, we are offering a 15% discount on the 2019 Reports Catalogue, plus an additional 10% discount on orders for multiple reports. If you would like additional information on any of our publications, or would like to place an order, please contact Melissa.Lee@NicholasHall.com