Walgreens Boots Alliance Q2 results were “in line with expectations”, the company said late last week. And while it was loss-making in the three months to February, there were positives in the figures, including its UK Boots operation continuing to outperform.

Looking first at the company-wide figures, sales rose 6.3% to $37.1 billion, despite the “challenging retail environment”.

The operating loss was $13.2 billion compared to operating income of $197 million in the year-ago quarter. That loss included a $12.4 billion non-cash impairment charge related to VillageMD goodwill. 

The net loss was $5.9 billion compared to net earnings of $703 million in the year-ago quarter, again, reflecting the non-cash impairment charges. Adjusted net earnings rose 3.5% to $1 billion.

US Retail Pharmacy sales rose to $28.86 billion from $27.577 billion with adjusted operating income down to $752 million from $1.067 billion. Retail sales (ie, excluding pharmacy) fell 4.5% and comparable retail sales fell 4.3% compared with the year-ago quarter, “reflecting a challenging retail environment, channel shift, and a weaker respiratory season”.

And now for Boots. The UK chain had been a problem for WBA a few years ago but has really turned things around in recent periods. This time, WBA’s International unit’s sales rose to $6.022 billion from $5.651 billion, although adjusted operating income was down to $245 million from $352 million. Boots UK sales specifically grew 3% and retail sales increased 5.9% compared to the year-ago quarter with “growth across all categories, and increased total retail market share”.

The Boots.com webstore, which is one of the UK”s biggest online sellers of beauty and health products, saw sales growing 16.8%, representing over 17% of Boots total retail sales.

The fall in the operating income figure was “entirely due to lapping real estate gains in the year-ago period” and the chain’s underlying growth offset inflationary pressures.

As well as retailing beauty and health products, Boots also has the UK license for Mothercare.

Analysts were impressed and Tash Van Boxel, retail analyst at GlobalData, said the Boots figures were “up against strong comparatives”. She added that the numbers “reflect a strong, albeit slowing”.

And she was impressed by the rising retail sales with that 5.9% figure comping after a 16% rise in the same period last year. 

“Boots’ narrowed focus on expanding its beauty offer has enabled retail sales to continue to grow, with Christmas trading bolstered by popularity of its beauty and gift sets,” she explained. “Indeed, own-brand gift sets performed particularly well during the festive season, with consumers being able to trade down to lower-ticket gifting items yet still treat themselves and loved ones.” 

And she added that brand additions were key as well. “Boots launched 19 new brands in Q2, expanding its beauty range with the likes of Drunk Elephant and Sol De Janeiro hitting the shelves,” she explained. “Previously, these brands were harder to obtain, but were offered by rivals Space.NK and Cult Beauty, however with Boots’ new and more extensive beauty offer, the health & beauty market leader has put itself in contention with its competitors, reducing the risk of consumers shopping elsewhere for more niche product ranges.”

Importantly too, airport locations are having an impact. “A new store in Luton airport, as well as refurbished stores in both Gatwick and Manchester, have enabled Boots to strengthen its influence in travel hubs,” the analyst said. “Boots is wise to invest in airport expansion, with passenger numbers continuing to improve, and consumers likely to be more willing and able to take holidays later this year, following the detrimental impact of the cost-of-living crisis on leisure spend in 2023.

“Moreover, Boots’ beauty-only store in London Battersea, which opened in December 2023, has helped to further promote its new beauty brands. With its offer in this store not diluted by pharmacy and miscellaneous items, the Battersea store will be an integral way for the health & beauty specialist to compete with the likes of Sephora, that is set to open a second store in London in November 2024.”