Holland & Barrett transformation boosts revenues but drags on profitability

Holland & Barrett has boosted revenues by £81m as an ongoing transformation plan attracted more customers to its stores, but losses at the health and wellness retailer widened as investment in the turnaround dragged on the bottom line.

Significant investment in overhauling its food offering and raising awareness in marketing campaigns last year helped drive increased footfall at the UK store base, according to newly filed Companies House accounts.

Group revenues, which include e-commerce and overseas trading, rose 11% to £806.1m in the year ended 30 September 2023, with UK sales also up 11% to £565m. The increase bumped up gross profits by 7% to £475.7m.

However, profitability was hampered as H&B ploughed about £70m into its stores, technology and new product development, with the retailer renovating hundreds of shops in a bid to turn around its fortunes following a debt buyout by owner LetterOne in November 2022.

While distribution and operating costs decreased 9.7% to £253m last year, administrative expenses soared by £76.2m to £244.8m as it implemented the transformation plan.

The group also took a £13.8m hit in exceptional costs linked to stock write-offs, store and warehouse closures and restructuring costs.

As a result, pre-tax losses widened from £59.6m to £65.3m. EBITDA was also affected by the turnaround plans – as well as the implementation of a new accounting policy change intended to improve cost management visibility – falling from £105.6m to £81.9m.

Despite the losses, executive chairman Alex Gourlay said the business was now in “a strong financial position”, with the strategic investments of the past year showing “clear benefits”.

He added the group invested more than £4m in the financial year on the transformation of the high street estate and would invest in at least one shop a day in the next two years in a UK & Ireland store refresh and refurbishment programme.

“There has been a clear shift in recent years in public perception of health and wellness, with focus shifting to preventive rather than reactive care, and people increasingly wanting to own and manage their individual health,” Gourlay said.

“To meet this shift, we are transforming the Holland & Barrett business: to deliver health and wellness that is easily accessible to customers in the UK and in our core international markets.

“We are moving to a clearly defined, mission-led approach to wellness (ranging from gut and women’s health to joint care, cognitive function and weight management), supported by qualified and personalised advice to customers, and science-backed solutions that help people’s short, medium and long-term health and wellness needs.”

Strong momentum continued into 2024, with a boost to vitamins and supplement volumes driving up sales and gross profits by 11% year on year in the eight months to the end of May.

Earlier this year, H&B appointed COO Anthony Houghton as CEO for a new UK & Ireland division as part of a group-wide restructure.

And this week, The Grocer reported H&B had agreed a partnership with Next to open concessions at the fashion retailer’s stores as it kicks on with the next stage of expansion plans.

“Over 63,000 hours of colleague training was delivered in the last year, to help colleagues better demonstrate and communicate the benefits and features our products to customers,” Gourlay added.

“We have also made excellent progress with our product innovation, launching 100 new sports transformation lines, the rollout of medicines and healthcare ranges and ranges focused on functional mushrooms, collagen, and other superfoods.

“We have made ambitious plans to invest further in technology, training and new product and service innovations to provide customers with qualified advice. We are focused on our vision to be the trusted partner for 100 million people globally, and excited for our next stage of growth.”