Boots chairman dismisses price war fears as 'bonkers'

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The Independent Online
THE CHAIRMAN of Boots yesterday launched a stinging attack on the threat posed by the arrival of Wal-Mart on UK shores, saying talk of an all-out price war on the high street was "bonkers".

Dismissing speculation that Wal-Mart's takeover of Asda would savage Boots' high profit margins, Lord Blyth said: "Wal-Mart ain't here. It's a supermarket called Asda which is skewed towards the North and has a store portfolio it won't be able to adapt easily.

"There's this view that there is this huge ogre out in Bentonville (the location of Wal-Mart's US head office) that is going to automatically transfer what it does in Iowa to Bradford. Well, life isn't like that."

He said he was surprised by the fall in Boots shares, which have almost halved this year describing the move as "lemming like". He insisted that Boots is not complacent about the Wal-Mart threat but that the company has a strategy to combat it.

Boots is preparing to defend itself through an increase in price promotions rather than across the board price cuts. It will also be working with major suppliers like L'Oreal and Procter & Gamble on exclusive ranges. If Wal-Mart secured better buying terms than Boots he would know about it "pretty quickly" and would expect to receive the same terms, he said.

Lord Blyth was speaking as Boots unveiled better-than-expected half- year results with pre-tax profits up 10 per cent to pounds 278m before exceptional items. Like-for-like sales in the Boots the Chemist business were up by 1.4 per cent on last year. This included a big improvement in the three months to September when sales were up by 2 per cent.

Philip Dorgan at West LB Panmure said: "They defended their position well but the arguments against Boots are long term rather than short term."

Steve Russell, who was named on Tuesday as the new Boots chief executive from next April, said Boots' market share had increased in the key health and beauty sector with customer footfall "broadly static".

Lord Blyth defended the decision to appoint John McGrath as its next chairman from next year, in a move which will see the two men swap positions. "Do you think John McGrath will not be a good chairman of Boots? Frankly, I don't see what the problem is." The shares closed 1.5p lower at 630.5p.

Investment, page 24