Bottom Line: Boots dispenses aid to weaker brethren

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The Independent Online
SIR JAMES BLYTH, chief executive of Boots, believes that Halfords, Childrens World and the group's other small retail chains can reap benefits from the transfer of skills from Boots the Chemist. A pity the process had not been started earlier.

Even excluding the disastrous Do It All joint venture with WH Smith, the four companies - Boots Opticians and AG Stanley as well as Halfords and Childrens World - between them made just pounds 6.4m at the halfway stage on pounds 316m sales. Some are at least showing an improving trend.

Halfords' profits improved from pounds 1.2m to pounds 5.8m as economic recovery combined with a refocusing of the stores to push like-for-like sales up 9.4 per cent. But, while margins almost quadrupled, they are still lanquishing at just 3.3 per cent and even eliminating the pounds 5m losses on car servicing - still not in prospect - would only increase them to 6.2 per cent.

Sir James claims that Childrens World, with 36 stores, has reached critical mass. That is just as well - the decline in losses from pounds 2.6m to pounds 2m was due to new openings. Like-for-like sales increased just 0.1 per cent. AG Stanley held profits at pounds 1m, although at the expense of margins.

Such a miserable miscellany merely emphasises the robust performance of the core Boots the Chemist chain. Excluding new openings, it managed to push sales up by 4.7 per cent while margins improved from 9.5 to 10.2 per cent despite growing competition on the high street.

Having kept net space static for the past 10 years, it is now starting a programme that will increase selling space by 8 per cent over the next five years.

Analysts are forecasting about pounds 470m for the year, putting the shares, up 6p at 511p yesterday, on 16.5 times earnings, or about 20 per cent below the stores sector. The strength of the chemist format makes that look mean.