RICHARD Baker looks calm for a man whose job he likens to "trying to do mid-air refuelling when you're hit by enormous turbulence".

The 42-year-old knew it was going to be "a challenge" when he took up the reins as chief executive of Boots two years ago, but the trading conditions and the competition have become a lot tougher than even he must have foreseen then.

When he was approached for the job by the current chairman Sir Nigel Rudd and his then outgoing predecessor John McGrath, Baker was given a clear brief to turn round the company and told by Rudd that achieving it would be a five-year task.

This has meant introducing major changes into the high street chain at a time when it is facing vastly increased competition for parts of its business from the supermarkets and budget drugs chains.

Baker says: "It is a 10-year catch-up and we have still to make the same progress that the competition is making. So you've essentially to do 15 years' work in five, " he says.

Baker says that, two years in, the first phase of that five-year task is coming to a close.

The changes he has introduced in the first phase have included replacing 14,000 tills which were an average of 20 years old and replacing the company's IT system. The cost of the IT programme was pounds-120 million with the replacement of the tills, which is being done on a leased basis, adding pounds-20m a year to operating costs.

Other changes have included reducing the head count at Boots's Nottingham HQ from 3200 to 1800.

Baker seized on a comment from one of the speakers at the CBI Scotland dinner, which he was in Glasgow to attend, as summing up his approach:

"You've got to let go to grow."

That "letting go" by Boots has included the closure of the company's factory in Airdrie, Lanarkshire, with the loss of 756 full-time jobs - after 60 years of production. Baker praised the team in Scotland for the way the closure was sensitively handled. He said that 95-per cent of the employees had now found alternative jobs with the company's help, and that he was pleased with the plans for use of part of the site by North Lanarkshire Council for a pounds-4.8m school and nursery.

Despite the closure, Baker stresses that Scotland is very important for the group and accounts for about 10-per cent of the Boots turnover. The company is investing pounds-26m over a four-year period in its 123-strong stores network here.

This has included the development of the 2400 square metre, pounds-3.2m store at Glasgow Fort, which is the first out-of-town store in the Boots group to have prestige make-up brand ranges such as Estee Lauder.

Baker's task is not quite as tough as that of Stuart Rose at Marks & Spencer or Justin King's at Sainsbury's, both of who head businesses which were in a worse condition at the start of their "rescue" periods than was the case two years ago at Boots.

You can bet that Baker has kept a close eye on both situations, a fact that will have been helped by his friendship with King. The two men worked together at previous companies and are close enough for Baker to have been at King's wedding.

Baker's task has been to refocus the Boots business on the two key areas of healthcare and beauty. It has also meant changing the pricing strategy of its products. Before Boots had been "run for cash" with the money taken in used to invest in other areas, many of which did not work out. Most of these non-core lines or those where not enough of a return could have been made - such as dentistry and the currently for sale Healthcare International business - have been, or are being, sold.

Baker says that there are stresses from the fact that Boots is working on this longerterm change programme while the market concentrates on 13-week trading periods.

Amid generally very tough times for retail, the sector's trade has been further hit since the July 7 and subsequent terrorist incidents in London.

This has had a particular effect on Boots, which has 60 stores within the London Underground Circle Line area.

Baker says that fewer people are making shopping trips into town centres since the incident and that trade is down as a result. "It would be wrong to characterise it as people stopping shopping but it is the kind of thing that can hit your figures by 2-3-per cent."

In a business where most of your costs are fixed - head office, distribution centres, rents and rates on stores - such dips in trade can go pretty much straight to the bottom line.

So the London bombings dip is the last thing that Boots and other retailers needed, coming against a backdrop of eight successive negative sets of figures from the British Retail Consortium.

Hence Baker's comments that this festive season's trade is going to be even more important than ever.

He says: "This Christmas is going to be exciting but on the other hand it is going to be a real white knuckle ride.

"We make twice as much profit in the Christmas period as we do in the other three quarters."

With sales this year having been so bad this presents a real challenge for retail bosses on how they advertise in the runup to Christmas.

"Do you do your advertising early to try and pull sales forward? Or do you accept that it's going to be last minute and concentrate all your spending in December?"

Baker declines to share the solution that he and his team have chosen for this particular dilemma, for obvious competitive reasons.

But at least there have been some brighter spots in the figures. Baker says that sales at the airport stores have been better than expected, with more people having got away from it all since July's London bombings.

But it will take a lot more than good sales at the airport for the "turbulence" hitting Boots to recede enough for the company to have a happy Christmas.


RICHARD Baker became chief executive of Boots in September 2003. An engineering graduate of Cambridge University, Baker was headhunted for the job from Asda, where he spent 10 years, latterly as chief operating officer and previously group marketing officer. Prior to that, he worked in a variety of roles at Mars for a decade.