Boots crisis deepens as US owner Walgreens announces plans to close stores

Boots faces an increasingly uncertain future as the crisis affecting its US owner deepens.

In a grim update for Wall Street investors yesterday, Walgreens Boots Alliance announced plans to close a number of stores in the US due to problems in its pharmacy business there.

Shares in the pharmacy giant, owner of UK stalwart Boots since 2014, plunged 25 per cent to a 27-year low.

Earlier this month, Walgreens insisted that “all options are on the table” as it considers selling Boots or taking it public on the stock market as a standalone business.

A London listing would be a major boost for the City amid concerns about the health of the UK stock market.

But yesterday’s disappointing results highlighted the challenge Walgreens faces as it tries to sort out its US business, casting fresh doubt on its plans for Boots.

“They have to do something right now,” said Jonathan De Mello, head of JDM Retail Consultancy.

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

The company has struggled to compete with rivals in selling prescription drugs and appointed a new boss, Tim Wentworth, last October in an attempt to turn around its fortunes.

It yesterday cut its profit targets for the current financial year, saying it blamed “challenging trends in the pharmaceutical industry and a worse-than-expected consumer environment”.

Speculation about the future of Boots, which has actress Keeley Hawes as an ambassador for its No 7 range, has been mounting in recent years.

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

Private equity giants Apollo, TDR Capital and Sycamore all made offers, but Walgreens later said no one made a suitable offer.

If Boots, which started out as a family-run herbal medicine shop in Nottingham in 1849, were to return to UK markets, it would be a much-needed vote of confidence.

Last November, Boots sold its pension scheme to asset management giant 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 easier to sell.

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

Products like model Kylie Jenner’s Cosmic fragrance line and beauty brands like Sol de Janeiro and Byoma have flown off the shelves.

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

“I am pleased to see our positive momentum continue across the business, with growing sales in both the retail and healthcare sectors and a 13th consecutive quarter of market share growth.”