Boots UK saw its post-tax profits triple in the 12 months to August 31 2023, its annual accounts reveal. 

The 2022-23 tax filing, posted on the Companies House website yesterday (May 28), shows that it made a post-tax profit of £47m, up from £15m in the previous tax year. Operating profit rose by 60 per cent to £88m year-on-year.  

Meanwhile, total revenue rose by 8.3 per cent to £7.05bn.

Scripts and services accounted for 33.1 per cent of revenue, a slightly lower share than the previous year (35.4%), with the remaining 66.9 per cent made up of retail sales – which saw a 12.2 per cent revenue boost as sales climbed to £4.7bn. This was “a result of improved footfall, increased online capacity and strong beauty performance,” said the company. 

The company has invested heavily in own-brand products and the wider health and beauty segment in recent years, as well as in beauty halls in flagship stores. These efforts saw the number of customers with an active Advantage Card membership rise by roughly 1 million to “approximately 13 million” during 2022-23.  

Though strong, the company’s retail offering is vulnerable to threats including downwards pricing pressure from competitors through sales promotions, say the directors in the report. 

Pharmacy sales rose by a more modest 1.3 per cent, with “favourable NHS drug reimbursement rates” mitigating the impact of “ongoing lower prescription volume” and lower demand for Covid and flu vaccines following the end of Government coronavirus policies. The company’s scripts and services business is “impacted by governmental agencies seeking to minimise increases in the costs of healthcare,” says the report. 

In addition to a whole-company overview, the accounts offer revenue figures for “comparable stores” – meaning ones that were open for the entire tax year without closures lasting seven days or more due to factors like store renovation or natural disaster. Comparable stores saw pharmacy revenue rise by four per cent and retail revenue rise by 12.2 per cent. 

The 60 per cent rise in operating profit was “primarily a result of a higher gross margin of £168m” and “by strong retail sales, partially offset by higher operating costs of £135m,” say Boots directors. 

These cost increases are due in part to increased distribution costs, which in turn are “driven by higher sales volumes,” as well as a £38m spend on “restructuring costs” associated with changes to the Boots store portfolio “alongside store and central support operating models”.

The report notes that 55 stores were closed during 2022-23, while the divestment through closures and sales of a further 300 stores was announced “to concentrate team members where they are needed and focus investment more acutely across the store portfolio, with the ambition of consistently delivering an excellent and reliable service”.

The directors say they “value an open dialogue with the communities in which the business operates” and take the interests of patients into account when planning store closures, with efforts taken to minimise service disruption.

Disruptive factors in the wider macroeconomic environment, such as cost of living pressures and the war in Ukraine, have “not caused a significant impact on the business to date” but have “contributed towards valuation of the company’s property-related assets,” negatively impacting the company’s short-term growth outlook and driving operational costs upwards, say the directors.