British retailer Boots said today operating profits were set to fall this financial year and announced the sale of its international division as fourth-quarter sales came in flat.
Boots, which last month warned on profits for the 2004/5 financial year as consumers rein in spending, said this and higher infrastructure costs would mean lower operating profits at its key UK Boots The Chemist (BTC) division in 2005/6.
Same-store sales for the current year were set to grow by as much as 2 per cent, Boots said, with new space adding a further two percentage points to sales. Operating costs were seen 6 per cent higher, it said, with the margin seen flat.
The company also said its would sell its successful Boots Healthcare International division and return a significant proportion of the proceeds to shareholders.
Boots also said it would shortly sell and lease back 300 of its smaller stores with a view to raising £250 million ($469 million).
Total group sales rose 1.1 per cent in the fourth quarter. Overall same-store sales growth for last year is expected to come in at 2.3 per cent, with the gross margin falling by 80 basis points.
The group has cut costs in stores and in its supply chain as it looks to invest the proceeds in lower prices, but the current sluggish trading has restricted its cost-cutting plans.