Boots forgets Botox and goes back to basics
Boots plans to move further away from its Well Being services initiatives and place even more emphasis on its core Boots the Chemists chain, which it believes has plenty more room for growth.
The strategic shift goes further than the company indicated in May when it unveiled a £170m store refurbishment programme and admitted its move into services such as chiropody and dentistry would not drive growth in the short term.
With strong sales growth now returning to the core chain, Boots is confident more own-brand products such as its successful Botanics range as well as new, exclusive ranges in cosmetics and fragrances can help it escape the clutches of the supermarkets.
It will launch a new range of "health living" products in January covering areas such as exercise, detox, relaxation and sleep. The exercise range will include exercise bikes, trampolines, running accessories and sports support products. Not all of these items will be stocked in stores but will be available on order or from the Boots website.
In the Boots Healthcare International division, the recently acquired Clearasil brand will be extended to a wider range of products.
The company has sought confidential guidance from the Office of Fair Trading over its nine-store trial with J Sainsbury under which Boots has taken over the health and beauty ranges in the stores. It is expecting a ruling any day and will then decide on whether to roll out the trial nationwide.
Boots chief executive Steve Russell is understood to regret investing so much in ventures such as the Well Being services, Botox injections, overseas expansion and internet businesses, which have provided little return. However, he is bullish about the "back to basics" strategy that will see Boots fight on its familiar territory of brand strength and product innovation rather than the "blue sky" move into services.
He said: "We believe there is significant potential in the core business, especially in health and beauty and that there are further opportunities to invest in new product areas. This is not to forget the gradual building of the service offering and the international operation."
Mr Russell has changed 40 of the top 180 managers in Boots in the past 18 months to help him deliver the strategy. Insiders say morale has improved noticeably since Boots completed the withdrawal from low-margin "leisure" sectors such as CDs and cookware.
Mr Russell still believes the move into services will work in the longer term and Boots insists there has been no strategic U-turn. Boots, which reports half- year results next month, has been under pressure in the City to produce a strategy which delivers more immediate returns. The results started to come though in a trading update last month which showed underlying sales growth in Boots the Chemists was 2.5 per cent in the first half, including 4.5 per cent growth in the second quarter.
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