Boots revenue rises, boosted by beauty, but profits hit by one-offs

Boots owner Walgreens Boots Alliance (WBA) files results every quarter but doesn’t always give a huge amount of detail about the UK Boots chain. So it was useful to see Boots UK’s latest set of accounts filed at Companies House, showing just how strong its recovery has been at least in terms of revenue.

Boots UK is only one part of the wider Boost business but the figures for the leading UK health and beauty retailer do give us some insight. They cover the 12 months to the end of August last year during which time it operated 1,840 stores, down from 2,177 a year earlier. That fact was key as it helped contribute to the overall profitability of the business and boosted its margins. 

The Boots UK business is divided into Pharmacy (the sale of prescription drugs and pharmacy-related services, which accounts for a little over 30% of the total), and Retail, (which covers all the beauty, health and lifestyle products that it sells in its store stores and online). Retail makes up almost 69% of the business and the percentage has been skewing in its favour year on year.

So first, let’s look at the figures. Overall revenue during the year increased 3.7% to £7.313 billion. That followed an 8.3% jump in the previous year. Operating profit surged by an astounding 211.4% to £274 million (although that was heavily impacted by a one off benefit) and overall profit for the year was up an even more impressive 348.9% at £211 million for the same reason.

As for that increase in profit, it included a one-off past service credit related to its pension scheme and excluding this, operating profit actually fell by £33 million. The fall was due to increased impairment related to stores and IT software, which more than offset the higher gross margin that it enjoyed. 

But it’s clear that with higher margins from a rationalised store estate, profitability is moving in the right direction 

Earlier this year, the company warned that it faced increased cost pressures despite its stronger sales and was focused on navigating these. It’s unclear how these might affect its business in the current financial year, although its parent company’s next set of results might give some kind of clue. That said we won’t be getting regularly-filed results from US-based WBA for that much longer given that it’s being taken private by Sycamore Partners with the deal expected to complete by the end of this year.