Boot (henry) Share Discussion Threads

[m.t.glass] 22/1/2003 14:57

So even 'Tempus' sees it only as a speculative play, for the adventurous. Not prepared to label it a sound investment.

[xerxesuk] 22/1/2003 14:28

From Tempus in The Times today

January 22, 2003

Best hope for Boots is a bidder

BEFORE Christmas few would have believed that Safeway would attract one takeover bid, let alone five. Yet six weeks later the supermarket chain, regarded as the ugly duckling of the grocery sector, is being pursued by the retail industry equivalents of Uncle Tom Cobleigh and all.
So what are the chances that Boots, the out-of-favour healthcare retailer, will be courted in a similar fashion?

Boots told anyone willing to listen yesterday that it had had its best Christmas for a decade in terms of sales. The absolute level of like-for-like growth, at 7.5 per cent for the three months to December 31, was also respectable in the context of comparable information published by retailing peers over the past couple of weeks. Boots shares, however, sank as investors chose to focus on the fact that the improved sales were won at the cost of narrowed profit margins. No matter that the inevitability of thinner profits was telegraphed to the market last year. Nor that, in chasing sales in this way, Boots was responding to suggestions from the Square Mile.

Public investors are right to worry about Boots. Despite the respectable sales performance in the last quarter, it inhabits a market that is largely mature and which is being attacked in increasingly competitive fashion by supermarkets. Efforts to diversify — into new product lines and services, and in overseas markets — have largely failed to take off. But similar points were made about Safeway, and the brickbats have not prevented bidders from Bradford to Monaco via Holborn, New York and Bentonville, Arkansas, to line up with their cheque books out.

The value of Boots shares, when measured against forecast earnings, is higher than the equivalent statistic for Safeway prior to the outbreak of bidding. But the prospective dividend yield on Boots shares, at 20 per cent above the average for the market as a whole, is the same as for Safeway, pre-bidding. Like Safeway, Boots has a sizeable property portfolio: about one third of its shop estate is held freehold or on long leases and this could attract a financial buyer.

Moreover, Boots is looking for replacements for John McGrath, the chairman, and Steve Russell, the chief executive. This leaves a question mark, if not a power vacuum, at the top of the firm which could be exploited by a predator. These thoughts are speculative. If a bid does not materialise, Boots may continue to struggle. Adventurous investors should buy in the hope a bid will come, however.

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[simon cole] 22/1/2003 11:22

Saying there is no need for Boots to exist is like saying there is no need for 8 or 9 different supermarket chains. Without Boots there would be no serious competition for all of the smaller chemists, pharmacies, etc etc. Without competition there would be no market.

[onehanded] 22/1/2003 10:44

They are not interested in margins anymore but to grow. Went long yesterday waiting for new management team soon to be released plus a watering down of the chemist debate by government. In the long run boots will struggle but expect a hype of the news in the next month.

[l2e] 22/1/2003 09:33

good morning...no position here but improving sales by cutting prices is an old game but you cant do that for ever...i hope the market turns around otherwise boots and others will get caught out big time....all the best

[m.t.glass] 22/1/2003 09:13

If Boots did not already exist, would there be any need to invent it? Is it filling some key need that nobody else has thought of? Don't think so.

At present its main use seems to be to the likes of Superdrug, supermarkets, et al, who can conveniently use Boots to compare their prices with. Whatever higher regard the public at large still have towards 'Boots The Chemist' as being somehow a little superior to its cheaper rivals doesn't look like it translates into serious loyalty. How many of us deliberately seek out a Boots branch for any particular product, rather than somewhere (anywhere) else? How often? I do think the public has an affection for having a Boots branch as part of its local High Street tradition and might like to see the chain be successful, but that's as far as it goes, imo. And that is not enough. People might be sad to see their local branch close, but they would manage perfectly well without it. Boots I fear is destined to just drift downwards and away if it can't get its act together in some clearly defined way without resorting to one tentative market experiment after another. Sad.

[roblonduk] 22/1/2003 08:54

In at 542 this morning on the early rise with a further £50 per point. (£200 p. pt in total)

It would be great to see a fiver...

Rob.

[roblonduk] 21/1/2003 20:25

Closed today at 533p.

The sales figures being the best in 10 years is a mean feat, but at what cost.

There appears to have been a historical reduction in the margins, and its those margins not sales, which equal profits.

There are interesting downgrades from Merill Lynch and Solomon Smith Barney. Profit reduction forecasts at this early stage of around 3-4% from 610m to 590/5m.

The OFT Report and reccomendation implications are extremely serious and still unknown.

No CEO, no strategic plan or announcements on strategy, loss making aquisitions in Europe and the Far East, the Wellbeing experiment, not doing as well as first anticipated coupled with the announced refurbishment of 165 of its stores ...

The news I'm afraid ain't great !

DOWN, DOWN DOWN

Rob.

[onehanded] 20/1/2003 08:43

Any profits on shorts need to be banked soon as 1 billon to be reinvested and this means share buyback and increase in divi to share holdres. May though be a while before all this happens, so shorters should be ok for a while.

[roblonduk] 19/1/2003 21:00

Report in today's Mail on Sunday indicates that Boots are likely to sell off its' Healthcare International Business including its nail bars and opticians, however its likely to keep the dentistry.

They didn't need management Consultants such as McKinsey to tell them their is huge potential in the dentistry side.

What is worrying is the indication that the profitable Optician business may be sold (Why?) and they are to replace their Stockbrokers and KPMG as Auditors.

This Company is in lots of trouble....To replace KPMG after all these years signals some form of reporting difficulty..

There's no-one at the helm and many of the directors are novices. They still refuse to release any strategic plans until a new CEO takes charge.

It will be interesting to see the share price this Friday...any predictions, I think it could now be below a fiver....

Rob.

[currypasty] 18/1/2003 00:41

Rule changes allowing new chemists to spring up wherever they want will have a bad long term effect IMO on boots.

[onehanded] 18/1/2003 00:39

Beware shorters this news was reported 3 weeks ago as the outcome.So already should of been short.Ive just closed my short for £500 profit and now looking to go long. My thinking, shorts closing now plus big threat of share buyback, results soon may well be good plus heard the management postion looking poor, may well be at a attractive price. This share for the last few years has greatly underperformed below it's profit ability. IMHO

[pjw956] 17/1/2003 18:36

sorry guys but in my local stores there are still rows and rows of christmas stock at 1/3 off.
Blackpool is a 3 layer store, most of 3rd layer is all reduced stock and loads of 2nd layer. preston is the same.
and if the pharmacy rules do change well.............
I cannot see how their results will be good.this is far too risky to buy IMHO.
you will see sub 500p

[onehanded] 17/1/2003 16:05

Thanks Goliard. Just think management will act on Feb 21 and like for like sales to be uo 5.5%. Eps forecast to 55p in 2003/04. Has to be worth £6 even with the threats of the above discussion. Not gone long may wait to see on monday and get in. Not any longer to defend margins but to inprove financial returns. IMHO. Risky to hold a short after being oversold with results due.

[bigboyo] 17/1/2003 14:35

The much awaited OFT report on pharmacy de-regulation was released today

The OFT merely reccommends --- the Government passes law -- so it is STILL to be seen whether the Government liberalises or gets taken in by the vociferous chemsits lobby

Boots will be hammered by liberalisation -- they make huge profits ( excessive return on capital employed ?) from the NHS --

400p here we come

imho dyor etc etc

[roblonduk] 17/1/2003 14:15

Very confident these have further to fall.

The deregulation of prescription outlets will result in the supermarkets simply wiping out the only aspect of Boots margin growth in the last few years. Growth in prescription revenue has been at an annual increase of 6% and this was previously in the Boots price.

Boots' share of such growth will be significantly undermined and I do not accept the announcements today that they are well placed with their High Street presence, Boots brand and aggressive marketing to see off the competition.

They have clearly been unsucceful with their over the counter medicines and have lost huge shares to the supermarkets, why will this trend reverse or be any different?

Boots have lost their way and I feel ultimately will slip significantly in the medium term to around £3 - £4, ( August/September) at which they may become an attractive takeover for the supermarket fiends.

But I'm no expert, just a very strong gut reaction. DYOR

These results will be the beginning of the demise- Such dramatic protestations !

But we'll soon see....

My predictions are:-

The "Wellbeing" experiment will be called a day or they'll announce that they are disappointed with the take-up and will be reviewing all the products, but perhaps not dentistry. There appears little take-up of chiropodody, 'Botox' and the other offerings.....

Overall, I'm expecting that sales may show a small fall or small increase of around 1-4% on last year and the reporting of significant write offs of capital expenditure (well being/international expansion).

I also predict severe reductions in the margins due to aggressive pricing/their 2 for 3 offers and other discounting.

The figures on Tuesday will be interesting to see. Anyone, got predictions?

I jumped in with another £50 a point short, (total £150 p.p) at 547p prior to the huge fall to 527p. I see though that whilst out this morning, they have re-gained some of their earlier losses.

I'll be happy getting out at around the 480p mark which is where these are easily heading.

Good Luck to the shorters, its a gamble but it will hopefully pay for my recent car

Rob.

[goliard] 17/1/2003 13:57

Sorry onehanded I disagree. Very negative long term for Boots. Local pharmacists will kill their prescription income and supermarkets will kill the medicines income.

Short.

[gowise] 17/1/2003 09:05

well this mornings news has certainly helped. Nice one Rob.

[roblonduk] 16/1/2003 09:01

Trading statement is on 21 January 2002, already a 5% fall since the post.

These have further to fall pending and following the trading statement.

Increased my short at 554p to another £50 a point. (Short £100 at average of 566p)

Rob

[goliard] 16/1/2003 08:52

Dont think trading update is due til 21st Jan unless anyone knows different. I still agree it will be lucky to be at 500p next week!

[denny] 14/1/2003 16:28

I agree, I shorted this stock @ 578. It has given me some nervous moments though as there have been wild daily swings with the stock sometimes up 20 on a day. I must admit I often though about closing my position but have stuck with it.

[gowise] 14/1/2003 13:47

Rob,

Thanks for that - very interesting. Been aiming to get in long if price gets to 550, attracted by divi yield, ever increasing profits and the strong possibility of a tie up with Sainsbury (especially if they miss out on Safeway).

May continue to monitor for a bit longer now without going in. Good luck with the shorts!

[roblonduk] 12/1/2003 21:29

Boots the Chemist is to report on 16 January and must be the clearest short I have seen in a long time.

The year has been littered with management fall out, strategic turnarounds, heavy competition from the supermarkets and a loss of direction for the Company. They stand currently at 574p and I believe we'll see at least a 5-10% fall following the results on Thursday.

The company for too long has been reliant on its NHS prescriptions and in today's markets it will simply get crippled as new franchising agreements emerge with the entreprenerial syndicates of local chemists and the big supermarkets.

There is also mention that Stuart Rose may take up a position with them if he isn't tempted by the Baguer bid for House of Fraser and a role of CEO.

I don't recall any company Stuart Rose has not entered where he is not asked to turn around a failing company. Arcadia and Booker to name the last two.

The writing is on the wall, Rose would not be in the least bit interested if this company was not experiencing some real real problems. Do your own research and all comments welcome.

In the meantime I'm filling my Boots and shorting these DOWN, DOWN, and DOWN !

Rob

[pjw956] 10/1/2003 17:50

his name was mentioned in the sunday times/telegraph a couple of weeks ago....I agree more wishful thinking than a certainty...but everywhere he has gone in the last few years has done wonders for the share price of whoever he joins. follow him to make some money !