Differentiated beauty strategy bolsters Walgreens Boots Alliance Q1 results

09-Jan-2017 - Last updated on 09-Jan-2017 at 14:32 GMT

Company sales for the quarter were down nearly 2% compared to the same period last year, and executives hope beauty will play a part in lifting sales figures. Though some analysts aren’t so optimistic.

Walgreens Boots Alliance has undertaken a three-pronged approach to growth: leveraging beauty, building pharmacy partnerships, and acquiring Rite Aid. So far so good, according the Q1 fiscal results press release.

“Overall we are pleased with the progress this quarter, with results in line with our expectations,” says Stefano Pessina the company’s executive vice chairman and CEO. “We continue to anticipate that growth in the second half of fiscal 2017 will reflect the new strategic pharmacy partnerships we announced last year. As a result, we have raised the lower end of our fiscal year guidance by 5 cents per share. In addition, we continue to work toward closing the pending acquisition of Rite Aid Corporation in the early part of this calendar year.”

Of some help

The company is reporting total sales for the first quarter of $28.5bn, a figure that’s down 1.8% in relation to the same quarter last year, but up 1.1% in constant currency terms.

The US retail pharmacy division (which includes beauty) saw a sales drop of .9% for the quarter. Walgreens Boots Alliance is quick to point out that this “includes the impact of the previously announced closure of certain e-commerce operations,” which is presumably a reference to the closure of beauty.com and drugstore.com.

Sales in health and wellness in addition to the beauty category offset that drop a bit, according to the release, which goes on to underscore that “since the end of the first quarter, the company has completed the first phase of the rollout of its new, differentiated beauty offering in more than 1,800 stores.” Among the global store brands Walgreens Boots Alliance is known for are No7, Botanics, Liz Earle (which was acquired from Avon in mid-2015), and Soap & Glory.

Limited potential

While the company has expressed optimism about its differentiated beauty strategy, financial analysts aren’t all onboard.

Writing for morningstar.com, senior equity analyst Vishnu Lekraj is skeptical about how well the company can do with cosmetics and personal care: “we are far less confident in a positive outcome for its health/beauty push. From our perspective, U.S. consumers may not view a retail pharmacy as a top destination for cosmetics where high-end specialty and department stores dominate the space.”