Putting the boot into a 'mature' business

RetailPharmacy: Three new Boots outlets are to open here in 2003, but the company's business in the UK is about to undergo a major shake-up

The Republic seems likely to avoid the severe cutbacks and store closures being considered by Boots in the UK. Reports suggest the pharmacy, health and beauty chain may shut several hundred of its 1,400 high street stores in an effort to bolster returns.

A new chief executive, Richard Baker, joined the firm only last week and sources close to the company anticipate he may pursue a cost-cutting exercise. The official company line, however, is that while some stores may close others will be opened in a readjustment of its large portfolio. This would avoid major loses of either staff or total number of outlets.

The situation seems far more positive for the Republic where the company currently operates 29 units, with plans to open another three before Christmas. "There is no impact for the Irish stores," according to a spokeswoman for the company.

"Everything here continues to be buoyant and they will be opening new stores before Christmas. There is nothing on the horizon here," she added.

Sligo is the latest Boots outlet, opening its doors about a fortnight ago. Two more will follow in Tralee and Clonmel, with a fourth new unit at an as yet unconfirmed location but definitely before the end of the year, according to the company.

Existing staff levels stand at more than 1,000 and this is expected to grow. The spokeswoman had no details, however, about plans for 2004.

Clearly the axe will fall in the UK, however, on the basis of comments made by the company's chairman, Sir Nigel Rudd, as reported recently in the Financial Times. Reforming the store portfolio would be one of Mr Baker's first tasks upon taking up the chief executive post, he said.

"There is a problem with the number of stores and the huge range from large to small," he said. "One of the things that they (the previous management) took their eye off the ball on was churning the store portfolio," Sir Nigel said.

The former Asda executive faces a tough time at the top at Boots. The company is a much-loved and trusted retail brand but its core pharmacy business is mature. There is much new competition on the market and the supermarket chains continue to chip away at its high-margin product lines.

The strategy for the future is simple, according to Sir Nigel: to return the core chemists chain to real growth. "There is a ton of work to do," he said. "But in terms of the strategy it is very clear. We need to become more efficient, more price competitive and we want to do things like change some of the store lay-outs and make it easier for people to pay. It is not brain surgery. It is just going to be a lot of very hard work."

This belies what really faces Mr Baker. Much of the company's top management have changed over in recent months and he is an outsider. The failure to churn its property portfolio means he will immediately have to get into re-sites and disposals, moves that will cause at least local annoyance as staff positions go - even if they are replaced at other locations. He will also have to find a way to cope with developments on the supermarket front. These chains and other discount outlets are anxious to move more forcefully into the expanding health and beauty sector and the more substantial profit margins that go with them.