At a Walgreens Boots Alliance Inc. store in New York, a woman walks by Boots No7 cosmetics on display for sale. Getty Images/Michael Nagle/Bloomberg Walgreens Boots Alliance claimed that as customers return to their homes, they are purchasing passport photos, restocking makeup bags, and preparing for Covid-19 doses. These three sales drivers helped the company earn more than expected in the fiscal third quarter. The drugstore company upped its year-ahead forecast, citing improved sales and Covid vaccination adoption as reasons for optimism. According to Global Chief Financial Officer James Kehoe, the company has given out more than 25 million shots, with around 17 million delivered in the last three months. Investors were concerned that the vaccines would only provide a temporary boost to sales, thus the drugstore chain’s stock plummeted on Thursday. The company is undergoing a turnaround guided by new CEO Roz Brewer, a former Starbucks chief operating officer, and others believe the shift will take time. However, Kehoe sees signs of improvement in the months ahead, such as increased retail traffic and discretionary spending. Customers bought common things like shampoo and toothpaste online or at the grocery store as they consolidated shopping visits during the peak of the pandemic, causing front-of-store sales at Walgreens to plunge. As they wore masks, customers primarily avoided categories such as makeup and cold and flu medication. According to Kehoe, this is beginning to change. In the United States, photo department sales increased by 54% and beauty merchandise sales increased by 15% compared to the previous quarter. Walgreens sells a number of photo-related things, including passport photos and wall decor, on its website and in stores, two areas that are capturing customers’ attention as they freshen up their homes and make vacation plans again. According to a corporate spokeswoman, Walgreens observed strength in the picture section, notably in passport photos and prints. Walgreens, on the other hand, saw a revival of beauty across the water. Boots, the company’s UK drugstore business, carries over 500 cosmetics brands, including 34 new ones launched this fiscal year. When compared to a period of stringent lockdowns in the United Kingdom, its beauty sales were up 85 percent year over year. According to Kehoe, the number of customers visiting stores is rising in all geographic markets, from rural to urban, with urban areas seeing the most significant growth in retail transactions. In the United States, sales transactions increased by roughly 7% although basket sizes decreased by around 5% as more customers returned to stores but did not buy as much as they did during the global health crisis’ stock-up phase. Walgreens is also seeing a rise in online sales, with a 95 percent year-over-year growth in digitally initiated retail purchases in the third quarter. Walgreens said it had fulfilled roughly 6 million curbside pickup and drive-thru orders, which were added during the pandemic as new shopping alternatives. A recovery in spending in categories like beauty and picture bodes good for the drugstore chain, according to John Boylan, a senior stock analyst for Edward Jones who covers consumer staples. “Those are usually fairly profitable goods in the store, and they’re also traffic generators,” he said. “It helps Walgreens become more of a destination location,” she says. Walgreens, on the other hand, is holding itself back, according to Neil Saunders, managing director of GlobalData, with stores and displays that “lack flair” and promote efficiency over inspiration. He pointed out that comparable sales increased by only 1.7 percent year over year, or 2.6 percent excluding cigarettes, which is a minor increase given that other shops are cashing in on a nationwide buying binge. As Walgreens expands its health-care offerings, such as primary care clinics, Saunders believes the company should also revamp its storefronts to make them more appealing. “Walgreens needs to redefine its retail proposition and reframe the experience to one that resonates with current buyers, in addition to the other things it is working on,” he wrote in an email. “If Walgreens fails to do so, it will continue to suffer in retail and miss out on many prospects for development.”/n
Read More
