Boots spends £390m to catch up

BOOTS is to create 3,000 jobs in its shops over the next year, which is double the number of posts that are being shed at head office under new chief executive Richard Baker.

But the move will come at a cost and dent short-term profitability, and Boots shares tumbled 49 1/2p or 7% to 665p on the news. Baker plans to invest £390m in sprucing up existing Boots the Chemists stores, opening 60 new ones and extending its Lower Prices You'll Love promotion.

Baker admitted: 'We have fallen behind the competition and been slow to respond to things like longer opening hours. The business requires a period of significant investment in the short term to improve its competitiveness, efficiency and bring it up to date with modern retail practice.'

He said customers should benefit from better signage, better computers and tills and further lowering of prices, which together would cost about 1.1% in margins for the year that starts next week.

Boots has slashed the number of store formats it has from 11 to three. Each of its 1,400 shops now falls into one of the three categories - convenience, community chemist or destination store. More of them will open on Sundays and more remain open later.

Profits for the year about to end should be in line with market forecasts following a 4% rise in like-for-like sales in the final quarter. But analysts were trimming their 2004-05 forecasts to reflect lower margins and higher spending on stores.

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The dividend on the shares, which yield 5.5%, will be held this year.