The Boots crisis deepens as US owner Walgreens announces plans to cut stores

Boots faces an increasingly uncertain future as the crisis engulfing its American owner deepens.

In a somber update for Wall Street investors, Walgreens Boots Alliance yesterday announced plans to close a large number of stores in the U.S. due to problems at its pharmacy there.

Shares in the drugstore giant, which has owned British high street Boots since 2014, fell 25 percent to a 27-year low.

Earlier this month, Walgreens insisted that “all options are open” as it considers selling Boots or taking it public as a standalone company.

Listing its shares in London would be a major boost for the City amid concerns about the health of the UK stock market.

But yesterday’s dismal results underscored the challenge Walgreens faces in getting its US operations in order, casting fresh doubt on its plans for Boots.

“They have to do something at this stage,” says Jonathan De Mello, boss of JDM Retail Consultancy.

“The future is uncertain, but I imagine they are busy behind the scenes preparing for some kind of trial.” Walgreens did not specify how many of its 8,600 U.S. stores would be closed, but it could be as high as a quarter.

The company struggled to compete with rivals in the prescription drug space, so in October last year it appointed new boss Tim Wentworth in an attempt to turn things around.

Yesterday, the company cut its profit targets for the current fiscal year, blaming “challenging trends in the pharmaceutical industry and a worse-than-expected consumer environment.”

In recent years, there has been increasing speculation about the future of Boots, which has named actress Keeley Hawes as ambassador for the No 7 line.

In 2022, Walgreens abandoned plans to sell the business due to an “unexpected and dramatic change” in market conditions.

Private equity giants Apollo, TDR Capital and Sycamore attempted to solicit investors, but Walgreens later said no one had made a suitable offer.

Should Boots, which started as a family herbal medicine shop in Nottingham in 1849, return to the British market it would be a much-needed vote of confidence.

Last November, Boots sold its pension fund to asset manager Legal & General for £4.8bn, paving the way for a potential takeover.

The deal, which was one of the largest of its kind, means it will be an easier sell.

Despite the gloom across the pond, Boots said sales in the three months to May 31 were up 6 per cent on a year ago.

Products including model Kylie Jenner’s Cosmic fragrance line and beauty brands such as Sol de Janeiro and Byoma are flying off the shelves.

Sebastian James, Boots UK and Ireland boss, said: “This is another set of consistently strong results for Boots.

“I’m pleased to see our positive momentum continuing across the business, with both retail and healthcare seeing sales growth and market share growth for the thirteenth consecutive quarter.”

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