Boots reports profit surge propelled by beauty sales

High street beauty retailer Boots has reported a leap in profits due to increased beauty sales and store footfall for the year ending 31 August 2023.

The UK’s largest health and beauty retail chain, owned by Walgreens Boots Alliance in the US, reported a 42.3% jump in pre-tax profits to £237.6 million. Boots attributes the profit hikes mostly to higher profit margins.

Revenue surged to £8.3 billion from £7.7 billion, thanks to sturdy retail sales, driven by beauty brands such as Rihanna’s Fenty Beauty, Liz Earle and Soap & Glory.

The heritage retailer also paid out £107 million in dividends between its subsidiaries and spent £38 million on restructuring costs, as it attempts to reduce its store quota from 2,200 to 1,900.

Boots has since posted a 5.9% increase in retail sales for the three months to February 29, with pharmacy sales increasing 1.7%. Online sales, which represent over 17% of the chain’s overall retail sales, were up 16.8%.

Walgreens Boots Alliance CEO Tim Wentworth said: "We're encouraged by our first quarter of US Healthcare positive adjusted EBITDA and continued topline growth alongside another quarter of strong execution in pharmacy, as we look to re-energise and evolve its impact both at Walgreens and at large. As we continue to operate in a challenging retail environment, we are taking action to focus on customer engagement and value.

“We remain confident in our goal of achieving $1 billion [£786 million] in cost savings this year. We are continuing to strategically review our portfolio over the next three months in an effort to ensure it drives growth and delivers value. Our team members, led by WBA’s new executive committee with a track record of operational excellence, are powering our progress as we map growth opportunities, aim to create long-term value across our businesses and execute the hard work to simplify and strengthen WBA.”

Back in November, Boots agreed to offload £4.8bn of its pension obligations to insurer Legal & General, suggesting a sale or stock market listing of the retailer. Walgreens abandoned its plans to sell the chain, which was founded in Nottingham in 1849, as it said bids did not reflect Boots’ potential.

Certain prospective buyers were discouraged by the complications of its large defined benefit pension scheme, for which the new owner would have become responsible. According to Companies House, Boots will have to pay out £786 million as part of the pension deal.