Boots plc has decided on a variety of measures intended to re-position its optical stores in a higher level of the market, offering more designer frames and high-quality lenses and fewer costly in-house services like new lenses in one hour. These and other measures are expected to improve the operating profit of its optical retail stores, which remained steady at £9.6 million (e13.9m-$16.0m) in the last financial year ended last March 31, in spite of an honorable 6.2 percent sales increase to £217.5 million (e314.3m-$262.1m).
In a significant departure from its former policy, Boots has also decided to test out the joint venture franchising format on a dozen free-standing locations next Fall. In contrast with other major players in the highly competitive British market, such as Vision Express and Dollond & Aitchison, where joint ventures with opticians have lately been more successful than their own corporate stores, Boots has been resisting until now the temptation to follow Specsavers' well-tested joint venture model.
Boots Opticians will also close 170 optical labs operating inside its stores, which employ about 240 technicians, while consolidating glazing and other operations into 28 regional centers throughout the UK. Some of the larger stores, particularly in the suburbs, will be chosen to act as regional centers.
It's not clear whether these measures are aimed at preparing Boots Opticians for a possible divestiture. The group says it will focus future investments on its drugs and drugstore businesses. Anyhow, the measures taken for Boots Opticians are part of a broader profit-oriented strategy set for the whole Boots group as it comes under a new CEO, Richard Baker. At its central headquarters in Nottingham, for example, the total staff is being trimmed down from 8,000 to 7,500 persons, eliminating many positions in information technology, finance and human resources.
The Boots group had previously shed various non-core activities, particularly in bicycle retailing and the wellness sector. Still, the cost of exiting unprofitable businesses and other factors weighed down on the group's pre-tax profit from continuing operations, which declined last year by 8.8 percent to £532.9 million (e770.1m-$887.1m) on 6.0 percent higher turnover of £5,092.4 million (e7,359m-$8,477m).
Boots suffered an operating loss of £1.4 million (e2.0m-$2.3m) in its LASIK business because of start-up costs connected with the opening of 4 new clinics. These and other previous openings led to a doubling in revenues from refractive surgery to £16 million (e23.8m-$27.5m).