Designed to create a new environment that will offer a special ?customer journey,? clearly differentiating Boots Opticians from price-driven competitors, the new store format will be rolled out this year on 25 locations at a total cost of £4 million (e m-$m). The new investments follow continued disappointing results for the leading UK chain in the fiscal year ended last March 31, where it experienced a sales increase of only 0.2 percent to £196.1 million (e323.6m-$277m), or 0.4 percent on a comparable basis, in spite of higher levels of discounting, advertising, promotion and significant improvements in service levels. The number of stores remained basically unchanged at 298, with a total selling space of 46,900 square meters.
Boots Opticians' operating profit declined to £4 million (e6.6m-$5.7m) from £11.2 million the year before, due in part to the new investments. Those included £3 million (e1.5m-$1.3m)on in-store lens manufacturing facilities and £1.7 million (e2.8m-$2.4m)on the new store format.
Another investment of £0.9 million (e1.5m-$1.3m)was made last year on Boots Opticians' new laser refractive surgery operations. A LASIK pilot store opened last December on London's Regent Street yielded better than expected results, so the group has decided to speed up the development of this new activity. Three more centers were set up in the last few weeks, and 2 more will follow by the end of August. Boots had initially budgeted a dozen centers all over the UK, each costing about £1.3 million (e2.1m-$1.8m), but they will probably be more in the end.
Boots Opticians' parent company, Boots the Chemists, continues to diversify beyond its core pharmaceutical specialty. First launched last February, its Songbird Disposable Hearing Aid program will be applied to 45 centers by next October, growing to 150 by March of 2004. Boots is also planning to set up 200 dental care and 200 foot care practices, generally on the same premises. It has opened 5 Health & Beauty Experience shops in the last few months, and it's planning to launch next September in London's Covent Garden the first of a series of stylish and informal Pure Beauty stores, targeting the premium cosmetics market.
Such new strategic initiatives involved operating costs of £42.8 million (e70.6m-$60.5m)and contributed to exceptional charges of £50.5 (e83.3m-$71.3m) last year. Before these charges and income taxes, the group's earnings rose last year by 1.8 percent to £581.1 million (e958.9m-$820.8m), and operating income was up 6.5 percent to £622.8 million (e1,027.7m-$879.7m). Group turnover rose by only 0.7 percent to £5,226.2 million (e8,624m-$7,382m).
Synergies and cost efficiencies are expected from the group's decision to combine into a fully integrated operation the activities in the UK and Ireland of Boots the Chemists, Boots Opticians, Boots Dentalcare, Boots Hearingcare and Health & Beauty. The new operation will be led by Ken Piggott as managing director, responsible also for supply and sourcing. Barry Clare will act as marketing director.