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Boots puts £170m into revamp

Nigel Cope,City Editor
Friday 31 May 2002 00:00 BST
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Boots yesterday unveiled a wide-ranging programme to modernise its high street chain of chemists in a move that will see the group place more emphasis on the retail basics of new products and stock availability and less on new services such as in-store dentistry and chiropody.

Boots will revamp 300 of its 1,400 high street chemists stores this year, including 170 in London. The store makeovers will cost £170m and take four years to complete. They are designed to breathe new life into Boots's sales, which have been under threat from the major supermarkets such as Tesco and Asda.

Steve Russell, Boots's chief executive, said: "We know we have under-invested in a good number of stores, especially in London. We think these new store formats will encourage shoppers to shop at Boots."

Mr Russell admitted for the first time that Boots' much-vaunted Wellbeing services, which include aromatherapy sessions and laser eye surgery, would not drive growth in the short term, having lost £33m on the services last year. However the company said its new Botox anti-wrinkle injections were doing well, despite the £200 cost. "We had 300 calls for appointments for Botox on one day alone this week," the company said. "It is more demand than we can cope with."

Boots said it remained committed to WellBeing services but indicated that some, such as physiotherapy may not work. The future of the six-store trial of Pure Beauty, Boots new upmarket cosmetics format, is less certain with delayed store openings and slower sales growth than expected. "The picture is not yet clear," Mr Russell said.

Boots is continuing its trial with J Sainsbury's under which Boots has taken over the health and beauty ranges in six Sainsbury's stores. It will monitor the performance during the next six months, slowing down its expansion into standalone edge of town sites while the trial is running.

The comments came as Boots reported a 10 per cent increase in full-year profits to £638m, before exceptional items. Growth at the main Boots the Chemists chain remains lacklustre. Like-for-like sales were up by just 1.3 per cent on the previous year. This was held back by poor sales from sectors such as CDs that Boots is pulling out of. Health and beauty sales were up by 3.3 per cent in a like-for-like basis.

Analysts supported the decision to invest in the chemists store portfolio but remained sceptical on Boots chances of withstanding the attack of the supermarkets. "We remain negative and still question where the top-line growth is going to come from," one said. HSBC downgraded its recommendation to "add" from "buy", keeping a share price target of 750p.

The shares fell 16p to 676.5p.

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