GlobalData: Boots remains on the back foot and struggles to remain relevant

Following today’s release of Boots Q1 figures for FY2019/20, Kate Ormrod, lead retail analyst at GlobalData, a leading data and analytics company, comments: ‘‘Disappointing results are a consistent theme in Boots UK’s quarterly trading performance, with no sign of a return to good health as the retailer remains engulfed by its strategic overhaul. The health & beauty market leader has now closed 28 branches out of its 200 target, and revamped 26 beauty halls, while rebalancing its product offer in 200 stores – all necessary actions, but increased efforts are required to affect faster change given the size of its portfolio.

“The muted comparable pharmacy sales growth has been driven by increased NHS reimbursement as well as higher services sales. Overall the trading backdrop remains taxing, and while Boots’ proposition is not without appeal, it has struggled to maintain relevance, amid pressure from discounters, general merchandisers and online pureplays alike.

“Boots needs to better exploit its competitors’ weaknesses, with opportunity at present to steal premium shoppers from Debenhams and House of Fraser, as its product offer is far better suited to their retreating customers’ high-end tastes than its closest rival Superdrug. Likewise, Boots’ investment in instore experience is sensible as it remains under attack from online pureplays, ensuring it can provide something that those without physical operations cannot. This strategy is however long overdue with retail standards having slipped some time ago, especially in smaller local branches.

“The health & beauty specialist followed up its strong online performance in FY2018/19, in which sales rose 14.4%, with further double digit growth, aided by record online sales in the UK during the Black Friday weekend, as sales lifted 25% on the year. Digital acceleration is one of its key strategic focuses, with room for improvement to remain competitive and satisfy UK shoppers’ demand for convenience, especially as Superdrug offers click & collect in as little as 30 minutes, and has a lower spend threshold for free delivery.

“Boots is top of mind for gifting in the run up to Christmas, with our data showing that it was the most shopped retailer for health & beauty purchases over Black Friday, however its 2019 branded offer was a cause for concern, with giftsets from premium brands like Karen Millen, Laura Ashley, Superdry and French Connection available, despite their popularity within fashion on the wane. Though Boots has strived to modernise its beauty offer and change consumer perception via the inclusion of 20 new brands, it needs to innovate its branded festive ranges, forging new partnerships to excite shoppers. Boots’ agreement with Mothercare to become its exclusive UK franchisee in baby is apt, ensuring the health & beauty specialist can further build its destination appeal in the category, and drive loyalty among shoppers.”