Boots reports 11% fall in annual profits

The health and beauty chain Boots today warned trading conditions remained tough as it reported an 11-per-cent fall in annual profits.

The health and beauty chain Boots today warned trading conditions remained tough as it reported an 11-per-cent fall in annual profits.

Boots said the competitive environment and a slowdown in spending across the UK high street meant an overhaul of the business had not been easy - although the early signs were "encouraging".

The fall in profits before tax and exceptional items to £481 million was ahead of guidance given at the time of a profits warning in March.

Chief executive Richard Baker said: "Trading remains tough and the first few weeks of the new financial year confirm that demand on the high street remains subdued."

Same-store sales at its core Boots the Chemists chain advanced 2.4% during the year to March 31. The company was continuing to expect this figure to fall back to between 0% and 2% in the new financial year, as announced last month.

Boots had already braced investors for a difficult year ahead, pointing to the impact of lower consumer spending and higher costs, particularly in relation to its turnaround programme.

Total sales increased by 2.7 per cent to £5.47 billion during the year.

Profits were hit by the cost of the restructuring, which saw Boots open 47 new stores during the year and reduce some 2,000 prices by an average of 14% under its Lower Prices You'll Love campaign.

Opening hours were also changed in a bid to lure in more customers, with 400 more stores opening on Sundays and bank holidays.

Among other parts of the restructuring, an overhaul of the group's supply chain was now more than 80% complete and an upgrade of the computer system was three-quarters finished.

Profit margins were expected to remain "broadly stable" this year, with better product sourcing continuing to help to offset the impact of price reductions.

Plans to dispose of the group's business making Strepsils and Nurofen were progressing well, with an information pack expected to be sent to potential buyers in early July.

The Nottingham-based firm put Boots Healthcare International up for sale last month as part of its restructuring. It expects to return a significant amount of the proceeds to shareholders.