Boots increases Christmas sales

LONDON (Reuters) – Alliance Boots, Britain's largest pharmacy chain, reported a 3 percent rise in sales in British stores in December, driven by demand for Christmas gifts, electrical beauty products and toiletries.

In a letter to employees seen by Reuters on Friday, the group said sales at stores that have been open for over a year rose 1.9 percent in the three months to the end of December. A 6 percent increase in like-for-like sales volume helped offset a 1.7 percent decline in like-for-like retail sales.

Alliance Boots AB.UL, which sells the No7 cosmetics brand and the Protect & Perfect beauty serum range, was acquired by private equity firm Kohlberg Kravis Roberts KKR.UL and CEO Stefano Pessina for £11 billion in June 2007 in Europe's largest leveraged buyout transaction.

The group was formed the previous year from the merger of the British pharmacy chain Boots and the pan-European pharmaceutical distributor Alliance Unichem.

“The challenging economic times and wholesale markets mean that we must work even harder to achieve our goals for the final quarter of our fiscal year ending March 31,” Pessina said in the letter. “In 2009, we will likely face the most difficult market conditions in recent memory.”

Many UK retailers are struggling as indebted consumers cut back on spending amid rising unemployment, falling house prices and fears of a severe recession.

Alliance Boots said group sales increased by 11 percent (excluding VAT and other sales-related taxes) in the three months to December 31.

Sales at the health and beauty division, which operates over 3,000 stores across Europe and includes the Boots chain, rose 4.2 percent, including a 1.3 percent increase on a like-for-like basis and at constant exchange rates.

Sales in the pharmaceutical wholesale sector rose by 16.3 percent. However, adjusted for acquisitions and sales and on the basis of constant exchange rates, the comparable increase in sales was only 0.2 percent.

“Most of our wholesale businesses have been negatively impacted by the particularly difficult market conditions in the countries in which they operate,” said Pessina.

German pharmaceutical distributor Celesio (CLSGn.DE) announced in November that its net profit fell by a third in the third quarter, due to lower payments for medicines in the UK and fierce competition in Germany.

“The group's financial position remains strong,” said Pessina. “We have strong cash flow and are currently also benefiting from historically low interest rates.”

(Report by Mark Potter)