When Retail Gazette reported that LloydsPharmacy – what was once the second biggest pharmacy chain in the UK – had filed for liquidation late last month many were shocked.
However, the chain had been quietly closing its stores over the past year before filing for voluntary liquidation.
Aside from a big announcement when it revealed it would be closing all 237 branches inside Sainsbury’s last year, everything else seems to have flown under the radar.
But, how did a business which had almost 1,000 stores at the end of 2022, just a over year later disappear from the high street without anyone noticing?
An acquisition with ‘significant potential’
LloydsPharmacy, which was founded in 1973, has had three owners over the past decade.
The business, along with its other units – LloydsPharmacy Clinical Homecare, LloydsDirect, Lloyds Online Doctor and a wholesale arm AHH – were sold by Celesio to American healthcare company McKesson in 2014.
However, the conglomerate sold its UK business to private equity firm Aurelius in November 2021 for £477m when it sought to fully exit the European market.
At the time, Aurelius partner Tristan Nagler said there was “significant potential in all four segments of McKesson UK to grow and enhance the business along with delivering further benefits to customers through additional investments for example in digitalisation measures”.
LloydsPharmacy at the time was in the process of “transforming the business into an omnichannel platform”.
It said in 2021 that the “novel Coronavirus pandemic has validated our digital strategy as we realised significant growth across its online offering”.
In September 2022, Aurelius renamed McKesson UK to Hallo Heathcare Group, which it said marked “the start of our exciting new world under Aurelius Group ownership”.
The following month, the firm separated the previous McKesson entities into independent business units. LloydsPharmacy was now an standalone company.
Stepping away from the high street
LloydsPharmacy’s retreat from the high street began back in 2017 when it revealed the it would exit up to 190 branches from its 1,600 store estate by way of closure or divestment.
It blamed government funding cuts and higher operating costs for the move as it swung to a pre-tax loss of £148m in the year to 31 March 2017.
Accounts on Companies House show the closures continued in the subsequent years with 17 stores in 2018, 60 in 2019, 76 in 2021 and 41 in 2022.
LloydsPharmacy stepped up its “rationalisation programme” in 2023, announcing it would be withdrawing its services from all Sainsbury’s stores after eight years in response to what it termed as “changing market conditions”.
The high street chain shuttered its 237 outlets inside the supermarket’s stores in June, resulting in around 2,000 redundancies.
It’s withdrawal from Sainsbury’s has not been entirely smooth sailing as the business is still facing a redundancy claim from the former pharmacy workers, who claim they are entitled to enhanced redundancy packages based on their original contracts.
As the same time, the company had also begun dividing its 1000+ community pharmacy estate into more than 82 smaller companies that it would sell on.
The stores were understood to be sold under three projects – Project Clover, Project Mulberry and Project Sapphire – with each managing a different geographical region in the UK.
In May last year, it was revealed that chief executive Kevin Birch had stepped down from his post after eight months at the helm.
LloydsPharmacy said that while Birch had “stepped back from his operational role”, he “will continue to support the company strategically”.
A month later, in June, parent company Hallo Healthcare confirmed it had sold all 32 of its private travel clinics, Masta, to Irish-led travel group Nomad Travel.
In November, Hallo announced it had completed the sale of its 1,054 high street and community pharmacies with over 6,500 branch colleagues transferred across to the new owners.
It is unclear how many redundancies Hallo made in relation to the pharmacy chain’s area managers and head office staff.
LloydsPharmacy filed for voluntary liquidation last month, marking the end of the pharmacy chain’s future on the high street.
Government funding
LloydsPharmacy has long blamed a cut in government funding for its widening losses and the reason behind its store rationalistion programme.
It posted a loss of £66m in the year to 31 March 2022, down from £100.8m, which it attributed to “optimising its portfolio of pharmacies”.
It’s clear that the business didn’t see much future in its store estate due to the “challenging” government funding model for pharmacy, which it claimed had a “serious impact on store profitability”.
The attitude is a stark contrast to that of Seb James, the chief executive of Boots – the biggest pharmacy chain in the UK – who has long been vocal about the role of the retailer’s pharmacies in supporting the NHS.
“We could help solve the NHS crisis. We could make a massive dent in waiting times for GPs and we could make a massive dent in waiting times for chronic care,” he said last year, calling on the government to allow pharmacists to provide more services.
The fact that LloydsPharmacy has been able to divest more than 1,000 branches to smaller healthcare chains and independents over the last five years, shows that others still view community pharmacies as a viable business.
What’s next for LloydsPharmacy?
LloydsPharmacy may have disappeared from the high street altogether but it still has a presence online and in hospital’s outpatient services.
A spokesperson for Hallo Healthcare confirmed: “The LloydsPharmacy brand name and heritage remains in specialist pharmacy, clinical and digital healthcare.”
The branding is still used for an online doctor service, clinical homecare and for patients in NHS hospitals, prisons, community health trusts and the private sector.
The company reported LloydsPharmacy.com experienced a 38% growth in the year to 31 March 2023, while its online doctor service increased 3% and its prescription delivery service, LloydsDirect, grew 55%.
It sold LloydsDirect to online pharmacy Pharmacy2U in October last year with plans to merge the two businesses into one digital-first pharmacy.
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