Boots continued to suffer from slowdown in consumer spending on the high street as the UK health and beauty retailer unveiled a fall in sales and said it saw no signs of a market recovery.
Richard Baker, chief executive, added to the gloom by saying he would not reiterate the retailer’s full-year sales guidance of 0-2 per cent, adding that the market would have to make its own view.
The retailer, which has put its over-the-counter medicines business up for sale following a string of profits warnings at its parent, said like-for-like sales at Boots the Chemists were expected to be down 1.3 per cent for the first half of the year as tough trading conditions continued.
Boots said while its performances in health and beauty and toiletries was encouraging, other categories - including food, photo and electrical - saw sales declines.
Mr Baker said: “Trading conditions have been difficult throughout the first half with consumer spending softening further over the last quarter and we see no sign that the market will get any easier for the rest of the year.”
He said the the retailer would continue to work on managing its trading margin, costs and working capital.
Mr Baker has previously said that the retailer’s priority should be to reinvest in the business, refocus on core markets and re-establish Boots’ position as a health and beauty expert.
As part of its strategy of focusing on core its business, the retailer earlier this year decide to sell Boots Healthcare International (BHI). The over-the-counter business has struggled to cope with competition from supermarket chains and upmarket department stores able to offer more specialist advice to customers.
BHI, which manufactures and sells products including Strepsils, the throat lozenges, is understood to have attracted interest from groups such as Reckitt Benckiser, GlaxoSmithKline and Germany’s Bayer.
Boots said on Thursday that the sale of BHI, which could fetch as much as £1.5bn to £1.6bn, was on track. Second quarter sales at the unit were expected to rise 9 per cent, the retailer said.
Elsewhere, sales at the group’s opticians business fell 12 per cent as consumers delayed replacing glasses and contact lenses. Boots Retail International, however, continued to perform well with sales up 12 per cent.
Analysts at CSFB said the ongoing sale process was continuing to drive interest in the stock. It said like-for-like sales down 1.3 per cent at Boots the Chemist could hit the full-year range, which was targeted at between 0-2 per cent. Combined with weakness in its opticians business, there could be downgrades, it said.
“This could cause some weakness in the Boots price, although market expectations of a significant premium to the original proceeds range of £1.2bn-£1.4bn could support the shares,” CSFB said.
Meanwhile Richard Ratner at Seymour Pierce said: “The sale of BHI - in our view will fetch £1.3bn - with resulting share buy back/special payment will encourage the ‘bulls’ and keep some investors quiet. However, once this has gone, there is no more ‘family silver’ left to sell and the cupboard will be bare.”
In mid afternoon trade the shares were down 3 per cent at 609½p.
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