The Pharmaceutical Journal
Vol 268 No 7201 p793-795
8 June 2002

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Boots plc (www.boots-plc.com)

London focus for Boots store revamp

London branches of Boots The Chemists will be given priority as part of a four-year £170m store refurbishment plan. Of 300 branches to be tackled this year, 170 will be in the capital.

Steve Russell, chief executive of the Boots Co Plc, admitted at the company's annual results presentation last week: "We have underinvested in our small and medium-sized stores, especially in London." Investment in stores is to be doubled, bringing spending back to levels seen two years ago.

Mr Russell said that a programme of refurbishment undertaken in the Thames Valley area last year (PJ, 17 November 2001, p705) has shown benefits. Sales have increased by up to 10 per cent in some stores. In particular, the installation of carousels has speeded dispensing and these will now be installed in more branches.

Branches are to be classified into six core formats, three for larger stores and three aimed at smaller convenience markets. The top format will be "experience" stores, such as Reading and Bluewater, with a full range of health, beauty and wellbeing services. These are supplemented by "destination" stores in cities and local destination stores in market towns, both of which will carry more premium cosmetics. The other three formats are local chemists, city centres and edge-of-town.

A trial of implanting Boots pharmacies within Sainsbury's supermarkets is to continue for another six months before any decision is taken to extend it. Ken Piggott, managing director of Boots The Chemists, said that the six pilot sites all previously had instore pharmacies. Rebranding them as Boots has increased sales. "The attraction of the Sainsbury's programme for us is that it allows us to gain some of the footfall in edge-of-town shopping that we are missing out on. We are not in it purely to gain dispensing contracts." Expansion in edge-of-town stores is, more or less, on hold until the trial is completed.

Speaking about control of entry, Mr Piggott said he believed that, overall, total deregulation of pharmacy contracts would be neutral for Boots. The company currently has 90 non-contract branches and would stand to gain from the effect on independents but would see competition impact on its own stores. "It remains our view that some sort of regulation is required, but not necessarily the current ones."

With the sale or demerger of the Halfords car parts business to be completed by the autumn, Boots has returned to being a health care business. It will have two main streams: Boots Retail (containing its core chain of 1,400 pharmacies in the United Kingdom and 29 in Ireland, and the 69 overseas stores in Thailand and Japan) and Boots Healthcare International, the non-prescription medicines business.

Overall, Boots reported pre-tax profits of £596m, up 21 per cent on last year, on a turnover of £5.3bn. Boots The Chemists continues to bring in the vast majority of this, with an operating profit of £614m made on sales of £4.1bn. Sales at Boots were up 1.3 per cent on a like-for-like basis. Overseas stores lost £35m and the loss-making Wellbeing digital television channel and the internet-based Bootsphoto.com service have been closed. BHI made profits of £56.5m on sales of £385.5m.