Boots sweetens jobs pill

RICHARD Baker, new chief executive at Boots, is determined that a spoonful of sugar will help the medicine go down. He will today soften the blow of 900 jobs going at the group's historic headquarters in Nottingham by announcing positive sales figures.

There has been an assumption that specialist shops like Boots will suffer in the era of rampant competition from supermarkets. But that does not have to be the case. An intelligent pricing strategy over the holidays - which took on Tesco and Asda item for item - left Boots a winner and the sales unveiled to the stock market are likely to be nearer the top end of the 3% to 5.5% range predicted.

Baker believes there is a terrific business to build on in Boots stores on the High Street, where they have always been, and at the edge of town. The group claims advantage over its supermarket rivals in its ability to offer a much larger range of healthcare products for all needs.

One of the difficulties has been the problems of accessing that range because of the gentlemanly opening hours at many Boots shops compared to rivals Superdrug and the grocers. The company is expected to unveil extended opening hours with its sales data.

Baker has continued what his predecessor Steve Russell started with the Getting in Shape programme taking £100m out of costs. The latest tranche of job losses, bringing head office staff numbers down from 3,000 to 2,100, will cost about £47m.

Pain is being taken at all levels from the human resources department to marketing - directors of both have vanished from the Boots board.

There will be moaning in and around Nottingham about the jobs exodus. But it is worth remembering that even after the present cutbacks Boots will still employ 7,000 people in the area to manufacture healthcare products and run its international operations.

Baker has hit the ground running and there may be some short-term cost on margins. If this turns out to be the difference between revitalising the business or allowing it to stagnate, it will be a worthwhile exercise that will be restorative for investors.

Bank deals

THE transformation of JP Morgan Chase from Wall Street investment bank to all-round commercial bank will be all but complete after the $60bn merger with Chicago-based Bank One.

Big bank mergers rarely work as expected. But if this one goes to plan then Bank One boss Jamie Dimon, once in line to succeed Sandy Weill at Citicorp, will have the ultimate revenge by directly challenging Citi from his new post as anointed successor at JP Morgan. Post merger, Morgan will have a Midwest and Southwest retail network and top-ranked credit card business to go with its corporate banking and fund management expertise.

All it is missing is a West Coast bank to become a full national player.

The latest bout of American bank mergers cannot be looked upon with total equanimity from London. Royal Bank of Scotland, with its New England operation, lacks real scale in the United States.

HSBC, having swooped on Household, has a substantial credit card and loan operation but lacks a substantial deposittaking network at a time when many US banks are investing hard in bricks and mortar.

The deal also exposes the failure of Lloyds TSB and latterly Barclays - the subject of frequent rumours of a link to Bank of America - to come up with a transforming deal. As JP Morgan Chase, Bank of America and Citi grow even bigger, the chances of any kind of merger of equals is long gone.

With the exception of HSBC, Britain's banks may have to get used to the idea of being secondclass regional players rather than world leaders - unless they act soon.

German gloom

THERE will be some relief in Germany that the euro is temporarily off the boil at $1.2575. The pound has also slipped to $1.82 on better American trade data.

Figures just released show that Germany was in recession in 2003 with output falling 0.1%, the first shrinkage since 1993. Consumption was sluggish and business investment was down sharply.

The best hope for 2004 recovery is higher exports cashing on the global recovery. But the strong euro may well make the international climate hostile for German exporters notwithstanding the nation's lead in engineering.

An interest cut now, when the euro exchange rate looks as if it is starting to wobble, might be just the thing. Neither Berlin nor the stagnant eurozone can afford another bout of euro strength.

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