Investments: Boots takes unstable conditions in its stride

THAT BOOTS was one of the few blue-chip stocks to buck the downward trend in the market yesterday was purely down to the "R" word.

Not recession but relief. After Tuesday's grim tidings on consumer spending from Marks & Spencer, the market feared the worst from Boots. But the retail giant, which is still dominated by the Boots the Chemist business, turned in a solid if unspectacular performance.

Stripping out the pounds 322m loss on disposal of the ill-fated Do-It-All business, profits were up just 3.5 per cent to pounds 251m on sales up 8 per cent. This is hardly the stuff of shareholder dreams but in this market Boots is a safe haven. Hence the 82p jump in the share price to 948p.

Like M&S, Boots has experienced some softening in consumer spending in October but nothing like on the same scale. At Boots the Chemists, for example, same-store sales actually rose in the second quarter - from 3.5 per cent to 4.2 per cent - and although they have turned down since then, they are still in positive territory.

Indeed, Boots the Chemists seems to be increasingly finding its stride under managing director Steve Russell. The Advantage loyalty card is helping to drive sales and yielding useful information for things such as the Mother and Baby catalogue.

Moves into health and travel insurance, as well as trials in dentistry, doctors surgeries and, most recently chiropody, demonstrate management's intention to leverage the strength of the Boots brand. International development in Holland, Thailand and Japan could also be promising.

Elsewhere Halfords, the last remnant of the Ward White acquisition, is doing well with profits up 22 per cent and Boots Healthcare International is progressing with brands such as Nurofen looking particularly strong.

On analysts full-year profit forecasts of pounds 570m Boots shares trade on a forward multiple of 22. After yesterday's leap the shares may struggle to rise much further in the short term but they look a solid hold.