Beauty revamp helps Boots beat forecasts

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The Independent Online

Sales at Boots fell less than expected over Christmas after the chemist cut prices and relaunched its beauty range.

Sales dipped 0.7 per cent in the three months to the end of December, about half the fall City experts had forecast.

But Boots, which plans to merge with its rival Alliance UniChem, remains cautious about prospects in the coming months. Sales in each of the previous three quarters were lower than in 2004. The company will not be lifting profits targets of about £385m for the full year.

Richard Baker, Boots' chief executive, said: "I think it will be a tough next three months. People are going to see some big bills landing on their doormats. There is nothing I see on the horizon that is going to change conditions for consumers. I think it's going to be quite a tough year."

Higher energy costs and steeper mortgage payments have left Britons with less cash in their pockets. Boots has also been hurt badly by stiff competition from supermarkets such as Tesco.

The encouraging Christmas followed a string of promotions, including successful three-for-two mix-and-match offers.

"Our plans for a seasonal offer focused more on our health and beauty expertise, with more products unique to Boots and more gifts at lower price points," Mr Baker said.

Sales of its beauty products, which typically carry higher profit margins, were 7 per cent better after the relaunch. Sales over the internet soared 44 per cent.

Boots, which is based in Nottingham, took on less stock than usual over Christmas, with more lower-priced goods. More own-brand products and better buying contributed to a further improvement in gross margin, which is a key measure of profitability.

The £1.9bn disposal of Boots Healthcare International, the over-the-counter-medicines business, to the household goods giant Reckitt Benckiser is expected to go through at the end of this month.

Boots investors will be paid a special dividend of 200p a share no later than 24 February. Boots shares have improved by almost 6 per cent in the past month. Yesterday, they rose 14.5p to 651.5p.