Sales up, margins down for hit-and-miss Boots

Christmas was a retail celebration for health and beauty market leader Boots, which posted its best third-quarter sales growth for more than 10 years.

But the store group did not get through the winter without catching a cold. Growth was at the expense of gross margin, which analysts fear fell by more than 100 basis points.

Christmas promotional lines and special offers lay behind the margin decline.

Like-for-like sales at the core Boots The Chemists chain were up 7.5 per cent for the period. Chief executive Steve Russell - for whom a replacement is being sought - said a strong platform has been built for future growth and that the retailer will continue to invest in price and more promotions.

Russell said: 'The sales result has been achieved at the same time as significant progress on our development agenda. We have improved customer service and product service levels, and have refurbished 165 stores.'

The group's beleaguered Wellbeing services division partially recovered from an interim£16.1 million deficit in profits to turn in like-for like sales up 7.3 per cent, but comparable growth at Boots Opticians slowed during the quarter.

A spokesman declined to comment on whether parts of the Wellbeing operation have been earmarked for closure.

Boots also declined to comment on speculation that Safeway chief Carlos Criado-Perez is in the frame to replace Russell.

Internationally, the retailer said that 'good progress' is being made in Taiwan and the launch of Watsons stores in Hong Kong exceeded expectations.

Like-for-likes in Thailand rose 6.6 per cent.