ZUG, Switzerland — With the announcement of Alliance Boots' year-end results Thursday morning, the future of what a finalized Walgreens/Alliance Boots merger might look like materialized to a greater degree.
"In February 2015, the six months window when Walgreens can exercise its option to merge with Alliance Boots begins," said Stefano Pessina, executive chairman Alliance Boots. The two companies' joint strategy of "creating the first global pharmacy-led health and wellbeing enterprise" will hinge on continued geographic expansion into emerging markets coupled with a constantly-evolving outlook on what it means to be an international omnichannel retailer.
Alliance Boots reported annual revenues of $39.2 billion for the year ended March 31, representing an increase of 4.3%. It's a considerable increase, the company reported — especially when you factor in the still-challenged marketplace and the preparations the company has been making toward it's likely merger with Walgreens in February.
"During the last 12 months a great deal of our management time has been dedicated to our Walgreens partnership, [including] our joint synergy program, our preparation for our merger and in dealing with the very heavy burden of complex reporting requirements," Pessina said. "Notwithstanding this, we have put considerable resources and energy into accelerating our international expansion, primarily M&A in emerging markets such as the transaction we announced last week in Mexico and Chile," he said.
Regarding Alliance Boots' wholesale division, the future is about expanding international partnerships, Pessina said. "Being global is important in many business sectors," he said. "This is why we had the vision and courage to enter into our transformational partnership with Walgreens and our ground-breaking joint agreement with AmerisourceBergen. This is why we ourselves are continuing to expand geographically in large developing markets in Latin America and Asia."
"We are at the point in our cycle where we are reinventing our business model," Pessina added. "For Alliance Boots this translates into accelerating our rapidly-evolving health-and-beauty omnichannel offering in an integrated way with even more differentiated products and services tailored to meed the rapidly-evolving customer behaviors and expectations in terms of choice, convenience or service."
Like Walgreens, Alliance Boots is very much focused on delivering an omnichannel retail experience. "As an omnichannel retailer we are increasingly integrating Boots.com into our core Boots product and service offer, bringing greater levels of accessibility and convenience for our customers," commented George Fairweather, Alliance Boots group finance director. "As a result, Boots.com revenue increased year-over-year by about 30%," he said. "59% of orders were collected in-store — that's a year-on-year increase of 14 percentage points, our pick-up by 2 p.m. tomorrow service, which now operates from over 2,300 Boots stores across the U.K., being particularly popular."
Regarding the progress in merging Walgreens and Alliance Boots, total synergies to date are ahead of target, Pessina said, with an 18.5% rise in underlying attributable profit. "While still at an early stage, we were pleased with the overall progress of the program," he said. “Our strategy of creating the first global pharmacy-led health and wellbeing enterprise in partnership with Walgreens is, I believe, widely recognised as being the right way forward. This is evidenced by the realignment of our industry that is starting to quickly take place, as competitors seek to follow our lead," Pessina stated. “Being global is increasingly important in many business sectors including our own. The steps taken by the Group over the last two years, most notably our transformational partnership with Walgreens, our joint agreement with AmerisourceBergen, our geographical expansion in Latin America and Asia and all the work we have done to develop our brands are enabling the Group to continue on its path to becoming the clear world leader in both retail pharmacy and pharmaceutical wholesaling."