£638.7m Boots to pull its socks up

HIGH STREET chemist Boots unveiled a comprehensive programme to modernise stores and bring in new products in a bid to boost sales and deliver long-term growth.

The decision emerged as Boots posted a 9.9% increase in profits before tax and exceptional items to £638.7m for the year to 31 March. Turnover was up just 2% while sales at the core chemist chain were ahead only 1.3%, excluding the impact of new space.

'My immediate priority is to drive sales by upgrading the store environment, creating more new brands and raising levels of customer service. My job is to deliver short-term profitability and lay the seed core for the long term,' said chief executive Steve Russell.

The group intends to refurbish 300 stores, including 170 in London, this year. All 1,400 shops in the chain will be upgraded over the next four years. The total cost will be £170m and there will be write-offs of old fixtures of about £70m. Store refurbishment, new products and improved services will cost £239m this year. The costs will be taken directly against pre-tax profits and compare with £127m in the year just ended.

In the 12 months to end-March, Boots the Chemist increased profits by 5% to £629m and health and beauty sales, where the group is focusing its attentions, rose 3.3% on a like-for-like basis.

Boots Wellbeing Services lost £33.1m. The division includes such areas as Boots Optician, chiropody, dental care and hearing care. Digital Wellbeing made a loss of £16.9m and Bootsphoto lost £6.9m.

'Some of our new services are profitable. Others have the potential to be profitable and others are less certain,' said Russell.

Boots Retail International lost £24.1m but the group has embarked on a less capital-intensive overseas programme so losses should reduce this year. 'The losses give me some discomfort but I am committed to reducing them, particularly in the Wellbeing offer, which is fundamental to Boots both here and overseas,' Russell said.

Boots Healthcare International, including Strepsils and Nurofen, improved profits by almost 12% to £66.7m and the intention is to make £100m in the near future by driving organic growth.

Halfords profits rose 29.6% to £54.3m. The company intends either to sell or demerge the business but a final decision has not been made. The total dividend is up 4.2% at 27.4p.