WHEN I was growing up in south east London in the 1990s, there was very little in the way of decent shops on the nearby Penge high street. The proliferation of betting and pound shops, which would eventually blight most shopping precincts, was already well-advanced. There were just a few of the chains that you would find in more prosperous areas: a Clinton cards; a Woolworths; and a Boots. Now there is only one. Indeed Boots has hardly closed any stores during what has been a truly disastrous downturn for retailers. Last year, like-for-like sales at UK Boots stores open for a year or more fell by 1.1 per cent, but the talk at yesterday’s press conference with executive chairman Stefano Pessina was all of expansion.
So what is the secret? Well, it certainly isn’t the revenue Boots makes by dispensing prescriptions, which fell by 1.6 per cent last year even as volumes jumped by 1.9 per cent. The government has cut the subsidy it gives to pharmacies while the replacement of branded drugs with cheaper generic ones – a byproduct of the patent cliff that has big pharma in such a panic – has also pushed down revenues. Nor is it the sale of non-prescription drugs for coughs and colds, which dropped last year thanks to a relatively dry winter. Despite its best efforts to punt remedies for more modern ailments such as stress and insomnia, like-for-like sales in retail health fell by 2.4 per cent.
It was an incredibly strong performance in its beauty and toiletries arm that saved the year; if it weren’t for a 2.2 per cent jump in like-for-like sales here, Boots’ overall performance would have been much worse. And it is this division, rather than prescriptions or paracetamol, that is a true yard-stick of how good a retailer Boots is.
Part of the reason is that toiletries are a pretty resilient category; things might be tough but most people haven’t got to the point where they’re willing to go without deodorant and shampoo. That is only part of the answer though. Boots has stiff competition in the form of the supermarkets for pretty much everything it sells, from nappies to lipstick.
Rather it is the combination of a major draw in the form of a dispensing chemist, a resilient product category, and some very good retailing that has kept a Boots on every high street. It’s just a shame it is so lonely these days.