Boots' profits down by a quarter

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The Independent Online

High street giant Boots said today that the cost of implementing its radical modernisation plan had driven half-year operating profits down by 24 per cent.

High street giant Boots said today that the cost of implementing its radical modernisation plan had driven half-year operating profits down by 24 per cent.

The retailer said the slump reflected higher pensions charges and a raft of price cuts introduced under the Lower Prices You'll Love promotion.

Clearance of seasonal stock and other marketing activity also contributed to operating profits falling to £204.5 million from £268.1 million a year ago.

Today's results follow the group's announcement in January that it would axe jobs as part of cost-cutting plans. In March, Boots embarked on a £390 million modernisation drive.

It said more than 1,600 jobs had already been lost at its head office and manufacturing sites, while a shake-up of its supply chain was progressing well.

Like-for-like sales at its core Boots the Chemist chain were 3.8 per cent ahead of a year ago - boosted by longer opening hours and price cuts on 3,300 product lines.

Footfall was up by 4 per cent compared to a year ago, although the poor weather this summer meant seasonal ranges were in low demand and this shaved 0.5 per cent off sales growth.

Chief executive Richard Baker said: "The actions we are taking have impacted profit, but are necessary to deliver a sustainable long-term return for shareholders."

Costs were 11 per cent higher in the first half against expectations of a full-year increase of 6 per cent due to the phasing of the business overhaul. Boots reported that a similar squeeze was being felt on margins, but full-year guidance remained unchanged.

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