"Traditionally, there have been three great British retail groups: Sainsbury's, Marks & Spencer and Boots. Two have fallen by the wayside and some people say to themselves: 'Is Boots the next to go?' But we are well equipped to deal with the competitive threat."
Both quotes could have been made at any time over the past few weeks. As it is, the first was nearly 20 years ago, grumbled by a critic unwilling to go on the record. The second came from the mouth of then chairman Lord Blyth - in 1999.
Yet ahead of this week's first-quarter sales figures, they are as fitting as ever. Since chief executive Richard Baker took over two years ago, profit warnings have been issued, a tough Christmas has been followed by a slowdown in consumer spending and competition continues apace.
Snapping at its heels are upmarket beauty outlets such as Space NK and the lower-brow Superdrug, owned by AS Watson, the retail arm of Asian giant Hutchison Whampoa. Then there are the supermarkets, offering cheap shampoo and toothpaste alongside the weekly food shop, and thousands of local pharmacies. With so much choice, it is enough to prompt the question: what, exactly, is the point of Boots?
"The company has the brand name and history that the likes of Superdrug don't," says one former senior manager. "But whether it has been under [former chief executive] Steve Russell or Richard Baker, it has demonstrably failed to move the brand into other areas. So can it maintain what it's got? Only time will tell." Before 1989, Boots was one of those dull companies that didn't do much. But this was the point at which Lord Blyth (then chief executive and known as Sir James Blyth) spent £900m on retail group Ward White. "It will change the company for ever," he mused at the time. He was right, though perhaps not quite in the way he envisaged.
Instead, it was the start of a period of nearly 15 years when the retailer sold off most of the businesses it acquired. It lurched from one strategy to the next, taking in children's shops, photography outlets, overseas expansion, laser eye surgery and insurance. And none succeeded. Couple those failures with the competition becoming steadily tougher, and Lord Blyth's bullish sentiment in 1999 - that Boots would survive while others failed - seems to have been misplaced.
And yet some are now hoping the impossible could be achieved - that Mr Baker will be able to turn the business around. "Most people think [first-quarter sales] are going to be down, but I'm looking for a small increase - say between a half and 1 per cent," says Nick Bubb, the usually bearish retail analyst at Evolution Securities. "Nothing major, but still, quite a bit better than most people are achieving."
The reason for this tentative optimism is that after years of scattergun strategies, Mr Baker is taking the company back to its roots. He has improved the supply chain and availability, cut jobs and spent £200m on reducing prices. Mr Russell's Wellbeing foray - new, home-grown services such as dentistry and chiropody - has been reversed and Boots Healthcare International (BHI), the owner of Nurofen, Strepsils and Clearasil, is being sold off.
With BHI gone, the group will be free to focus on retail and its core offerings of health and beauty and pharmacy. A new marketing campaign has already been launched: out goes a focus on price and margin-denting special offers, and in comes a presentation of the group as a long-established expert.
"Boots has fundamentally understood and tackled some of the old problems that it had," says retail analyst Richard Hull. "It has realised that its market is hugely competitive, and it has gone in and put things right. The company has got more to do but, from everything I have heard and seen, it is clearly well down the path to getting the essentials right."
Boots has been here before, however. Back in the early 1990s, the group decided to focus on its health and beauty heritage (sound familiar?), with ranges such as Estée Lauder and Lancôme introduced into stores.
"We had five fantastically successful years, following a strategy not dissimilar to the one that it is trying to follow now," says a former head of merchandising. "We were taking the top- end business from the department stores quicker than the supermarkets could take family shampoo off us."
Today, of course, the competition is much tougher - the Tesco effect was not an issue then - but there isn't much the company can do about that other than accept it.
"Boots allowed the competition in 10 years ago and the current management is having to live with that and carve out its position within that," says a company spokesman. "We have taken an unsustainable business model and we have moved it towards being more competitive. Prices had drifted and stores hadn't been invested in - our tills were 12 years old. That's what we have had to do in the last few years."
However, neither are its retail rivals standing still. Superdrug recently hired a public relations firm and the retainer, to a degree, appears to have been worth it. As Boots toiled, Superdrug, like some perky younger sister, breezily announced an ambitious expansion plan. Chief operating officer Euan Sutherland even suggested that Superdrug, desperate as it was for more space, would happily set up shop in some of the bigger stores that Boots was struggling to fill.
Most, though, are taking Superdrug with a pinch of salt. "It's a different animal," says Mr Hull. "The question is how viable it is long term. It has not invested at the same level, it has less brand awareness and the customer base is less loyal."
Superdrug announced recently that it would spend £75m on expansion; the capital expenditure of Boots last year was £350m.
Superdrug is not prepared to answer such criticisms. "I don't think we would want to engage in that sort of conversation," says a mildly shocked spokeswoman before adding help-fully: "We're very focused."
Writing off the threat, however, would be wrong. For while Mr Baker's strategy may please some, problems remain. The group has 1,400 shops and only the Post Office boasts more footfall per week. Yet it does not have enough products to fill the space in its bigger stores.
Mr Baker has mooted the idea of bringing in partners such as the currency provider Travelex (rather, one would imagine, than Superdrug), but that plan does not win universal approval. "Boots could end up looking like a rummage sale," warns the former senior manager.
And ultimately, if not surprisingly after so many wrong turns, Boots still has many to win over. Says Simon Proctor, retail analyst at broker Charles Stanley: "Effectively it's going to stagnate. It will reach a nadir next year but then will bump along the bottom.
"It's been a hugely necessary exercise putting it on a much more sustainable footing. There's very little you can fault Richard Baker for in addressing that. It's just there are structural issues that aren't going to go away. There's been huge under-investment."
If history is anything to go by, what Boots does next won't be dull. The real question, however, is not what it does next but whether - finally, after so many false starts - it will actually work.
INS AND OUTS
Car parts and bicycles
Boots acquired Halfords in 1989 as part of the Ward White takeover. Sold in 2002.
A children's concept store.
Acquired Payless, Homestyle and Fads through Ward White. Sold in the late 1990s.
Linked with Royal & SunAlliance to offer health and travel cover in 1998.
In the 1970s, the chemist shops sold a raft of unrelated products, including art.
The group stopped selling this in 1987, despite annual sales of £20m.
A dedicated photographic shop was opened in 1987. It failed to take off.
Standalone, upmarket beauty stores. "We tried to roll it out too quickly. It cost a fortune," concedes a company spokesman now.
Services included reflexology, laser eye surgery, hair removal, dentistry and chiropody.Reuse content