Boots offloads Halfords for £427m but sales disappoint

Boots, the health and beauty retailer, announced the sale of its Halfords car accessory business yesterday along with a disappointing trading statement which showed its main Boots the Chemists chain is still under pressure.

Boots is selling Halfords to the venture-capital group CVC Partners for an initial £410m in cash which could rise to £427m if certain performance targets are met. Halfords has 400 stores and made profits of £54m on sales of £528m last year.

The deal draws a line under one of the most disastrous retail deals in recent history. In 1989 Boots paid £900m for Ward White, a business which included Halfords, Payless DIY, Homestyle and Fads. The acquisition was masterminded by the former Boots chairman Lord Blyth, who felt the company needed to diversify away from its core chemists business. However, the various parts underperformed and were sold off, mostly at knock-down prices.

Boots' first-quarter trading statement showed the continued impact of competition from the major supermarkets. In the three months to June like-for-like sales at Boots the Chemists were just 0.9 per cent. Within this, health and beauty sales were up by 1.9 per cent on an underlying basis.

Boots blamed poor weather which had affected sales of suncream as well as "one-off events" such as the World Cup and the golden jubilee. Margins were also lower.

One analyst said: "They were indifferent numbers and if they had come out with them on a bad day for the market they would have been hammered." Boots shares rose 14p to 567.5p.

Another said: "They haven't had any decent sales growth in for three years and the cost savings are coming to an end. We will start to see the true underlying competitive position."