Boots heads for a glum Christmas

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The Independent Online

Boots said like-for-like sales declined by 1.6% in the second quarter - twice as fast as the rate of decline over the previous three months.

But the firm said the first-half decline of 1.3 per cent was distorted by cheaper medicines due to regulatory price changes, insisting that sales of its health and beauty ranges and toiletries had been encouraging.

Boots, which has an estate of about 1,400 stores, estimated that lower prices of medicines had cost it about 1 per cent of like-for-like sales over the past six months.

Chief executive Richard Baker said the strategy of emphasising the expertise of Boots as a health and beauty retailer was proving its worth.

Total sales of health products were up 0.2 per cent in the second quarter to be 0.6 per cent ahead in the first half, while beauty and toiletries maintained their growth momentum to stand 3.3 per cent higher after six months.

But weak demand for food, photo products and electricals was reflected by sales of lifestyle ranges fading 3.4 per cent in the second quarter to end the first half 3 per cent down.

Mr Baker said: "Trading conditions have been difficult throughout the first half, with consumer spending softening further over the last quarter and we see no sign that the market will get any easier for the rest of the year.

"Our priority for the second half continues to be delivering for our customers while managing our trading margin, costs and working capital."

Investors hoping for a detailed update on the £1.2 billion auction of the Nurofen-to-Clearasil healthcare business were disappointed, although Boots insisted that the sale process remained on track.

Mr Baker said the expectation that consumer confidence will worsen meant that the retailer was no longer hopeful that it could reach its target of at least flat sales this year.

"We are not reiterating our guidance (on sales) because the market is tougher," he said, adding that Boots would need like-for-like growth of 1 per cent over Christmas to reach positive territory.

But he assured investors that the other full-year targets set out in March on margins and costs remained unchanged and Boots was "where it wanted to be" in those areas.

Mr Baker said total sales of cosmetics and fragrances were 7 per cent higher in the first half, dispensing volumes were up 4 per cent and sales of toiletries pushed ahead by 3 per cent.

But changes to rules governing who can sell contact lenses had led to a round of "savage price cutting" in the market as Boots was forced to follow the lead of rivals such as supermarket giant Tesco, Mr Baker said. First-half sales of optical products were 12 per cent lower than a year ago.

Food sales were harmed by the bomb blasts in London in July as the company has about 60 stores close to the Circle Line on the underground out of an estate of 200 branches in the capital as a whole.

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