The owner of Boots has just announced a trading profit of £1.27bn in the year to March 31 – marking its second straight year of double-digit growth.

The owner of Boots has just announced a trading profit of £1.27bn in the year to March 31 – marking its second straight year of double-digit growth. The news follows the US pharmacy chain Walgreens’ decision to purchase a 45% in the company last year, creating the industry’s first global player in the process. The combined group has 11,000 stores in 12 countries and serves more than 170,000 pharmacies and health centres throughout 21 countries.

In the UK, Boots is an incredibly well-known and trusted brand that has the luxury of operating against very few competitors. More importantly, Boots also happens to be a company that understands its customers very well. Its loyalty programme, in particular, has been a masterstroke in this regard. Not only is it a key element of its customer offering, but it also provides the company with valuable customer insight for product development and marketing.

At the start of the year, the number of active Boots loyalty card members was just under 18 million. This makes it one of the largest and most valued loyalty schemes in the UK, with cardholders now responsible for more than 60% of all the company’s retail transactions. Interestingly, Boots has also revealed that 90% of active members are women, representing nearly two thirds of the adult female population in the UK.

As well as being extremely popular, the Boots Advantage scheme is a valuable business tool that actively encourages repeat purchasing. Boots’ ability to engage with customers at this level might help to explain why the company hasn’t been hurt by the rising popularity of online shopping or the dominance of the big supermarkets in the same way that fashion retailers have.

If anything, new proposals for more relaxed government regulations will only help Boots to build on this success in the UK. You can be sure that Boots is already prepared for these changes and planning how to maximise the resulting opportunities. Not only would the retailer benefit from its massiveeconomies of scale in this regard, but its secure place in the market – combined with the incredibly onerous barriers to entry – would also make it nearly impossible for any new players to steal its thunder.

However, Boots is not resting on its laurels. Not content with its expansion across Europe and into the US, Boots also plans to double its Chinese operations within two years in order to become a nationwide operator in the country. Executive chairman Stefano Pessina has described the Chinese market as the last big piece of the jigsaw after last year’s deal with Walgreens.

But Mr Pessina must be careful. In the midst of its global success, the company needs to remember that its UK retail like-for-like sales were actually down by 0.7% in the year to March 31. So even though Boots may be on the path towards world domination, it will still need to take steps to protect its own well-earned Advantage points at home.

  • Dan Coen, director, Zolfo Cooper