Boots pulls out of Japan joint venture as losses grow

The International ambitions of Boots suffered a further setback yesterday when the retailer abandoned its joint venture in Japan after experiencing heavy losses. Boots will close its three health and beauty stores in Tokyo as well as a fourth in Yokohama. It relationship with Mitsubishi Corporation, its joint venture partner, will be ended.

The decision will result in a £10m exceptional charge to cover the costs of the closures. The Japanese stores recorded a loss of £3m last year on sales of £10.5m. They lost £12m in the previous year. Boots says it is not pulling out of Japan completely. It has been reviewing its international business model to try to find a cheaper, more flexible approach after racking up accumulated international losses of £128m in the last four years.

Boots may decide to open smaller stores in Japan which will only stock the Boots brand. It may also open "concessions" in department stores and supermarkets. The company has already tried both these concepts in Thailand and Taiwan.

Boots attempted to put a brave face on its Japanese experience: "We do not feel disappointed," a spokesman said. "We had already started to think about different formats and different business models. We are investing for the medium to long term and we have to accept that it takes time to get it right."

However, some analysts have questioned why, after four years in overseas markets, Boots has yet to find a formula that works. In May, Boots announced it had lost £43m in its international retailing business last year. Boots is to report on a strategic review of its international retail operations in October.

Boots' overseas interests include a distribution deal in Holland under which Boots ranges are distributed in 180 Etos stores. It has 70 outlets in Thailand by these are being scaled down to smaller sizes. There are also eight stores in Thailand and a trial in Italy in four Esselunga supermarkets.

As well as £128m of trading losses overseas, Boots has incurred exceptional charges of £33.5m. This includes £10.5m in Japan and £23m in Holland when it closed its stores to pursue a distribution arrangement. Boots has been trying to broaden its retail interests after coming under sustained attack from the supermarket groups in the UK. It is increasingly moving into health services, such as dentistry and chiropody. It is also planning a new, upmarket chain called Pure Beauty. Boots shares closed up 2p at 611p.