'Fragile' economy hampers Boots sales

The fragile state of Ireland's economy hampered retail sales and hit profits at Boots, the British-based chain said today.

The company said like-for-like revenue at division fell 3.9 per cent in teh year ended March 31st 2010. Overall revenue rose 1.1 per cent as the chain opened four new stores, including a flagship outlet in Cork.

Dispensing growth at the Irish stores was well ahead of the market.

"Profits were lower due to the decline in like for like revenue and lower gross margins," the company said in a statement.

The company said it was planning further store openings in 2010 and 2011.

The poor performance in Ireland comes as Alliance Boots posted annual profits of over £1 billion today, becoming only the third UK retailer to pass that milestone, along with supermarket group Tesco and Marks & Spencer.

The group said strong growth in own-brand products like No7 cosmetics and in its international
wholesale operations would help it to cope with tough markets across Europe.

"We are certainly not expecting the economy to improve at all. We're budgeting for a subdued
environment," chief executive Andy Hornby said.

"Nevertheless, we believe we are competing in attractive markets and our formula is working."

Retailers across Europe are struggling in a sluggish economic recovery and fear that steps to rein in
government borrowing could hit consumer demand in the months ahead.

Also today, Swedish fashion group Hennes & Mauritz reported a drop in underlying April sales,
while Britain's Travis Perkins said the home-improvement market was fragile.

Alliance Boots' executive chairman Stefano Pessina, who teamed up with private equity firm KKR to buy
the group for about £11 billion in 2007, said he had no plans to relist the company for some years.

"If we list the company, of course we have to give a dividend. We have to probably ... be slower in doing what we want to do, and we still have a lot of things to do with this company," he said.

"For sure we are not talking one year or two years. Five, six - maybe, it depends," he said, adding the group wanted to grow earnings and cut debt some more before listing, and a decision would also depend on market conditions.

Alliance Boots, which employs 115,000 people, said trading profit rose 12.7 per cent to £1.07 billion
pounds in the year.

Revenues rose 9.6 per cent to £22.5 billion. That included a 3 per cent increase in like-for-like sales at the core Boots UK health and beauty business.

Mr Hornby was confident the firm could continue to fight off competition from supermarkets by innovating new own-brand products, like the successful No7 Protect & Perfect skincare range, and expanding in pharmacy services.

Wholesale revenue rose 10.3 per cent, helped by strong performances in Russia and the group's Chinese joint venture.

Additional reporting: Reuters