Boots to operate concessions abroad instead of shops

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The Independent Online

Boots is planning a U-turn on its overseas expansion strategy with the decision to dump new store openings in favour of operating concessions within other retail chains.

The change, which is expected to be confirmed within the next few weeks, is likely to include the closure of existing overseas stores.

The Boots chief executive, Steve Russell, signalled earlier this month that its overseas expansion strategy was being reviewed, following a period trialling new formats.

Most recently, Boots has preferred partnership deals such as the one with Etos of the Netherlands, where Boots sells its range of health and beauty products within 142 Etos stores. The set-up is similar to a deal in the UK with J Sainsbury, where Boots is operating concessions in a number of the group's bigger supermarkets.

A spokesman for Boots declined to outline details of the new strategy yesterday, but analysts believe the group could look to phase out its existing own-store operations in the Far East, in particular Taiwan and Thailand. Although it has more than 60 stores of its own in Thailand, the group has begun selling products through the local supermarket chain Tops.

At its most recent trading update, Boots also said it had opened "implants", or concessions, in the chemist chain Watsons in Taiwan and in Esselunga supermarkets in Italy.

Mr Russell readily admits the retailer has had only mixed success abroad, and needs to develop a strategy that will bring more rapid and less risky growth. Operating losses in the overseas retail business were more than £12m in the six months to last September, on top of £32m in the previous financial year.

The formal retreat from own-store expansion comes less than six months after the group pulled out of a joint venture and closed down its Japanese stores.

Mr Russell said earlier this month that Christmas trading across the group was "not at a level at which we can be satisfied". Sales growth in the last three months of the year, stripping out new retail space, was up just 2.4 per cent despite the buoyant conditions on the high street. The group has promised to boost profits by squeezing £250m of cost savings this year.