Boots drives up digital’s share of sales after using Covid to rethink priorities

Covid gave Boots an opportunity to reinvent itself, the brand’s parent company has said, with far greater emphasis put on digital and exiting the pandemic in a stronger position.

Boots.com now account for 15% of sales, up from 9% pre-pandemic, with digital sales in the second quarter of its fiscal year jumping by 60% versus 2020.

While online sales during the three months to 28 February were impacted by the rise in footfall at physical stores compared to the previous quarter, the Boots.com business remains in a “very strong position”, according to James Kehoe, executive vice-president and global chief financial officer at Walgreen Boots Alliance.

“I don’t think there are many retailers in the UK that have a [digital] business that represents 15% of sales,” he said on an earnings call sharing the company’s Q2 2022 results. “This is a business that used Covid as a time to really invent itself and exit much, much more strongly than it went into Covid.”

As part of this mission to strengthen the business and drive reappraisal, Boots launched its ‘Feel Good as New’ brand platform last June. Walgreens Boots Alliance credited the role it played in driving a 15% increase in comparable retail sales in the fourth quarter of its 2021 fiscal year.How Boots balances creativity and science to drive effectiveness

Speaking to Marketing Week at time of launch, CMO Pete Markey said: “Ultimately this is about driving a reappraisal of the brand through the lens of what we offer today, the role we play in people’s lives today, and the stronger role we can play in people’s lives in future – not just on the high street, but on our online business.”

Within two months of launching, Markey said the campaign had boosted online and in-store sales, with overall searches for the brand jumping by 15%.

In its latest earnings call, Kehoe said the Boots business has created “massive momentum” and predicted “positive growth ahead”, but that it won’t fully recover from the affects of the pandemic until its 2023 fiscal year.

Strategic review

Walgreen Boots Alliance initiated a strategic review of the Boots business during the first quarter of its 2022 fiscal year as it looks to “maximise value”, which CEO Rosalind Brewer said is “progressing well”.

She added that the “transformational actions” the business is taking are “accelerating sustainable value creation”.

Boots saw retail sales increase by 22% in Q2 compared to the same period last year, with market share “strengthening” across all categories and beauty performing “particularly well”.

As part of its focus on beauty, the company relaunched the Boots 17 beauty brand in February.

The business said it also saw “stronger demand” for services (up 75% year on year), which helped drive pharmacy sales up by 3.6%. This was helped by Covid testing and vaccinations, as well as new online health care services.

Meanwhile, Boots stepped up its loyalty offer with the launch of its Boots Price Advantage programme for Advantage Card holders during the period. It offers additional discounts for members, similar to Tesco’s Clubcard Prices.

In-store footfall increased by 52% for the quarter, which includes the crucial Christmas shopping period. But despite this rise, footfall remains around 15% down compared to pre-pandemic levels. This is partly as a result of restrictions to combat the Omicron surge being in place for most of the quarter.

Overall, operating profit for Walgreen Boots Alliance’s ‘international segment’, which includes Boots, increased by 60.7% to $226m (£172m) for the second quarter compared to the same quarter a year ago on a constant currency basis.

While the segment includes Germany, where it has a wholesale business, this “doesn’t make very much money”, Kehoe said, “so you could presume that the majority of the profitability in the international segment is related to the UK business”.