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It’s almost as if the past two decades never happened. Boots, that stalwart of UK retail, is edging back towards the public markets, 19 years after a private-equity buyout put an end to its London listing. Sycamore Partners, the buyout firm that took its parent Walgreens Boots Alliance private last year, may float it in 2027.
WBA has explored selling its UK pharmacy arm before, only to change course. This time round, conditions might be more favourable. Boots is doing surprisingly well. It has grown sales at a steady 6 per cent annually over the past five years. If that continues to 2027, revenue could reach about $11.7bn, and assuming a similar margin to last year, operating profit might be somewhere in the region of $700mn.
Investors would want to put that on a multiple, based on where peers are trading. Compare Boots to high-volume retailers such as Tesco and J Sainsbury, with enterprise values of about 12 times this year’s forecast operating profit, and it would be worth a bit more than $8bn, higher than the $7bn that WBA had in mind in 2022. Its equity value would depend on how much debt its current owners decide to saddle it with. The group might merit a bit of a premium to the supermarkets given it has a bigger online business, accounting for about a fifth of revenue.
But the real opportunity will be to pitch Boots as more than a drugstore. Prescription drugs come with thin margins. Front of store staples for the traditional high-street chemist, such as toothbrushes and painkillers, are available in every supermarket as well as online. Beauty, though, is a bigger prize. It is more profitable, if more discretionary. Ulta Beauty, a US cosmetics retailer, makes about a 43 per cent gross margin. CVS, a giant pharmacy retailer that competes with Walgreens, made just 19 per cent last year on its pharmacy and consumer division.
Boots’ own recent run hints at this. Thanks in part to turning a tenth of its stores into “beauty halls”, the company notched up retail sales growth of 10 per cent in early 2024, according to a WBA earnings transcript at the time, led by skincare, haircare and fragrance.
How much could that opportunity be worth? Ulta is valued by investors at almost 18 times forward 2026 operating profit, including its net debt. Snag that kind of rating – aggressive, admittedly – and Boots would be worth almost $13bn.
Much will depend on the mood of the market. Listings have been scarce for the past few years, though signs of life are emerging, with Revolut, Monzo, Visma and even Waterstones all potential candidates. As a 177-year-old high street fixture, Boots is at least a well-known quantity. But it’s the beauty, or otherwise, of the IPO market that will decide its next move.
