Boots faces an increasingly uncertain future as the crisis engulfing its American owner deepens.
In a somber update for Wall Street investors, Walgreens Boots Alliance yesterday announced plans to close a large number of stores in the U.S. due to problems at its pharmacy there.
Shares in the drugstore giant, which has owned British retail chain Boots since 2014, fell 25 percent 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 standalone company.
Listing its shares in London would be a major boost for the City amid concerns about the health of the UK stock market.
Closures: In a somber update for Wall Street investors yesterday, Boots owner Walgreens Boots Alliance announced plans to close a slew of stores in the U.S.
But yesterday’s dismal results underlined the challenge Walgreens faces as it tries to turn around its US operations, casting new doubt on its plans for Boots.
“They have to do something at this stage,” says Jonathan De Mello, boss of JDM Retail Consultancy.
“The future is uncertain, but I imagine they are preparing for some kind of process behind the scenes.” Walgreens did not specify how many of its 8,600 U.S. stores would be cut, but it could be as much as a quarter.
The company has struggled to compete with rivals in prescription drug sales and appointed new boss Tim Wentworth last October in a bid to turn its fortunes around.
Yesterday, the company cut its profit targets for the current fiscal year, blaming “challenging trends in the pharmaceutical industry and a worse-than-expected consumer environment.”
Speculation over the future of Boots, which is eyeing actress Keeley Hawes as ambassador for its No 7 range, has increased in recent years.
In 2022, Walgreens abandoned plans to sell the business due to an “unexpected and dramatic change” in market conditions.
Private equity giants Apollo, TDR Capital and Sycamore made pitches, but Walgreens later said none had made an adequate offer.
If Boots, which began as a family-run herbal medicine shop in Nottingham in 1849, were to return to the UK market, it would be a much-needed vote of confidence.
Last November, Boots sold its pension scheme to asset management giant Legal & General for £4.8 billion, paving the way for a potential takeover.
This deal, one of the largest of its kind, means it will be easier to sell.
Despite the gloom across the pond, Boots said sales were 6 percent higher than a year ago in the three months to May 31.
Products such as the perfume line Cosmic by model Kylie Jenner and beauty brands such as Sol de Janeiro and Byoma are flying off the shelves.
Sebastian James, boss of Boots UK and Ireland, said: “This is another set of consistently strong results for Boots.
“I am pleased to see our positive momentum continue across the business, with both retail and healthcare seeing revenue growth and market share growth for the thirteenth consecutive quarter.”
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