Boots to expand out of town and overseas stores

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BOOTS THE Chemists is to head out of town and overseas as part of a move to diversify its business in response to increased competition from supermarket chains.

Steve Russell, Boots' joint managing director, yesterday gave a presentation to City analysts in which he detailed plans to open 160 new edge-of-town stores, bringing the total to 200. He said the company would also accelerate its expansion in the Netherlands, Thailand and Japan, as well as moving into new markets. The international division lost pounds 20.9m last year and is not expected to break even for some time.

A spokesman for Boots said: "These plans are part of a wider differentiation strategy to show that we are not on the same playing field as the supermarkets." Boots faces challenges from Asda Group's pharmacies after the UK's third largest retail chain was bought by the world's largest retailer, Wal- Mart, in July.

The spokesman said that whereas supermarkets focussed on price-cutting, Boots was a more serviced-based business with a wider range of products. "We have plans for aromatherapy centres in our stores. You may even be able to come to Boots for your holiday vaccinations in future," he said.

But Richard Hyman, chairman of Verdict, the retail consultancy, said: "Boots will have to lower its prices if it's going to compete with Wal- Mart."

The plans unveiled yesterday include a move to launch six major new products in the first quarter of next year to boost the company's toiletries and cosmetics range. The group will also roll out its existing service business such as its dentistry, chiropody and Boots Men stores to build on the success of its optician unit.

It is thought the new strategy, which will reduce the ratio of operating costs to sales by three percentage points over three years, will produce pounds 120m in annual cost savings by the end of the third year, with additional savings of pounds 40m to come from changes to the supply chain. The spokesman said there are no planned job cuts going forward, although 500 posts were earmarked for culling after a strategic review in June.

Mr Russell said new delivery channels could account for more than 10 per cent of Boots The Chemist's sales within five years as the company steps up its catalogues and online operations. The company recently launched, an online service aimed at women. Boots' shares fell 18.5p to 687p in a weak retail market.