Richard Baker probably needed a double dose of some of the products made by Boots after confessing to the City that all was not going as well as hoped. Strepsils to ease a throat sore from explaining what had gone wrong and Nurofen to dull the ache of the battering he received from the stock market.
The Boots chief executive had made the mistake of being too optimistic about the company's outlook, trusting that relatively buoyant Christmas trading figures would continue into the new year. He had shared this optimism with investors only to have to tell them, just weeks later, that the picture was not nearly so rosy and forecasts for the year would not be met.
Disappointing the City puts a black mark against a chief executive's name that can be hard to erase. Baker might be an optimist, but he might well have avoided causing such upset if he had tinged his optimism with caution. After all, he waited until 19 January to deliver his update on how Boots had fared over Christmas. Those numbers were relatively encouraging, with same store sales up 2.6% over the last three months of the year. But customers clutched their purses tightly once January arrived, and have continued to do so. Baker may not have wanted to put a dampener on his message so early in the year, but there was little to lose by flagging up the possibility that the spree was over.
The Governor of the Bank of England has said it will not be clear whether consumers indulged in a bumper spree over the festive season until well into 2005. The fact that so many shoppers now prefer to look for bargains in the January sales rather than pay the full price in December has skewed the pattern. Boots, however, is the place where people pick up the last-minute gifts that must be handed over by December 25 or risk causing offence. Boots had a newly extended range of foodie gifts that sold well alongside the perfume and toiletries, but customers were not delaying their purchases in the hope of further post-Christmas price cuts.
Baker became CEO at Boots only in September 2003. A more cautious – perhaps a more Machiavellian – individual could perhaps have avoided so upsetting investors and allowed himself more wriggle room. It seemed Baker was recruited to put right the mess Boots had become, after dangerous diversifications had been allowed to distract from the core business, where the supermarkets were making such inroads. Critics were asking whether the group had a long-term future, just as they were raising doubts over the prospects for Marks & Spencer, Sainsbury and WH Smith.
The fairly youthful Baker, a graduate of the Asda school of retail management, was hailed as the great hope for this bastion of British retailing. Like Stuart Rose at M&S, Justin King at Sainsbury and Kate Swann at WH Smith, he had installed himself in one of the hard seats in the high street.
Soon after arriving, he told the City that there were no easy solutions. By May the following year, he was bullish, declaring that the company was changing fast and reporting underlying pre-tax profits for 2003-04 up 2.7% on sales ahead by 5%. Other new CEOs might have indulged in the full 'kitchen sink job', knocking back expectations, making huge write-offs and explaining that it would be a long and demanding task to resurrect Boots, and that investors should not expect overnight miracles.
Boots' problems are long-established. It was 1989 when the then CEO, now Lord Blyth, bought Ward White, a motley collection of businesses ranging from Halfords, the bicycle shop, to the Payless DIY chain. Only nine years later did the group finally, and expensively, extricate itself from this misguided venture.
Then, as the supermarkets ventured deeper into Boots territory, the next boss, Steve Russell, began to experiment with laser eye surgery and Botox. The company looked worse, rather than better, as a result. And while Russell focused on his new ventures, the dismal store distribution systems were leaving shelves pitifully empty.
It took several months to find someone prepared to step into the shoes that Russell vacated in May 2003. When Baker arrived, he found things were even worse than he might have imagined: the tills, for instance, had not been changed for a dozen years and so did not provide the instant sales information that modern retailers expect at the press of a button.
He got to work quickly, doing away with hundreds of jobs at the company's bloated head office and slashing prices in his 1,400 stores. But the problems are too deep for a Boots patent cure to effect a rapid recovery, and while Baker labours, Tesco and Wal-Mart continue to use their muscle to offer his customers lower prices.
It may be that he can make the most of Boots' particular assets – its pharmacies, its own-label cosmetics and medicine manufacturing – to produce a formula to generate a reasonable return. But he should have given himself time to try.