Though Walgreens Boots Alliance’s first-quarter 2020 earnings showcased what executive vice chairman and CEO Stefano Pessina said was “a slow start to the financial year,” there were some silver linings in the company’s U.S. operations as relates to owned brands.
WBA also affirmed its guidance of roughly flat earnings, highlighting some of the efforts it already has made in Q2, including its group purchasing organization with Kroger, which is designed at improving private label efficiencies for both companies.
As front-end sales decreased by 2.2%, co-COO and Walgreens president Alex Gourlay said the company worked to emphasize higher-margin health and beauty products — the latter of which includes the company’s owned brand No7, which performed well both in stores and online.
“Our strategy of focusing on the higher-margin health and wellness and beauty countries is delivering benefits, and both delivered solid performances in the quarter,” Gourlay said. “Our flagship No7 beauty brand performed well, with sales up in the mid-teens, reflecting our nationwide advertising campaign and our new e-commerce site.” The company said it saw a record performance on Black Friday through its e-commerce offering.
As it eyes the rest of the fiscal year, the company highlighted its ongoing partnership with Kroger as a bright spot that has delivered and will continue to play an important role in the coming months, both from a retail standpoint and in driving efficiency with private label.
On the retail side, Gourlay noted that in addition to bringing more footfall into Walgreens stores that sell Kroger products, it allows Walgreens to bring its own brands to Kroger shoppers.
“We are seeing substantial sales growth both in the box itself and also in the categories that we’re supporting,” he said. “We've also launched our own products. And I think we’re going to have them in just over 15 Kroger stores, so this gives us an opportunity to put our health and beauty composition and private label/owned brands into their customers’ views as well.”
As the partnership continues, the group purchasing organization joint venture that the companies inked in December will help with supply chain cost management for Walgreens and Kroger, Gourlay said.
“We expect this joint venture to deliver cost savings, encourage sourcing innovation and generate efficiencies across the supply chain,” he said.