Boots store

LONDON, Nov 3 (Reuters) - British healthcare group Alliance Boots [ABN.UL] believes fun and innovative products, like cosmetics sold under the name of hit TV show "Strictly Come Dancing," will help it to attract wary shoppers this Christmas.

The group, taken private in 2007 in what at the time was Europe's biggest leveraged buyout, said on Wednesday it expected strong full-year results after revenues rose 6.6 percent at constant exchange rates to 8.9 billion pounds ($14.3 billion) in the six months ended Sept. 30.

Growth was driven by market share gains in its core British health and beauty stores, as well as a strong performance in its international drugs wholesale business.

"We're confident about our prospects for Christmas, but undoubtedly the consumer is going to be watching how they spend their money very carefully," Finance Director George Fairweather told Reuters.

Britain's retailers are worried that tax hikes and public spending cuts aimed at reducing government debt could hit consumer spending in the months ahead, at a time when they need to raise prices to cover higher input costs.

Next (NXT.L), Britain's second-biggest fashion retailer, said on Wednesday it expected a slow 2011, while a survey showed British shop price inflation in October rose at its highest annual rate since January.

Fairweather was confident Alliance Boots could fend off cut-price competition from supermarkets, thanks to innovative products such as its No7 Protect & Perfect skincare range, and to higher levels of customer service.

SERVICE AND SELF-HELP

"In the last few days up to Christmas, that's when we sell a very significant amount of perfume. At that point, dare I say it, it's a male purchase looking for advice, and looking to get it right," Fairweather said in a telephone interview.

He also said the group would continue to look at improving its efficiency, highlighting a restructuring of its wholesale business aimed at saving 24 million pounds a year by 2013/14.

The restructuring will cost around 500 jobs, or about 2 percent of the division's workforce, although some of this will be achieved by normal staff turnover.

Alliance Boots, which was bought for 11 billion pounds by private equity firm KKR [KKR.UL] and Executive Chairman Stefano Pessina, said first-half sales in Britain at Boots stores open at least a year rose 1.8 percent, including VAT sales tax.

Initial results of a trial with upmarket grocer Waitrose [JLP.UL], under which Waitrose and Boots sell a limited range of products in one another's stores, were encouraging, it said.

Underlying sales at Boots stores outside Britain, however, fell 1.8 percent, dragged down by weakness in Ireland, and civil unrest in Thailand from March to May.

Wholesales revenues rose 8.7 percent at constant currencies.

Alliance Boots said it had reduced net borrowings, without giving a figure, with strong cash generation, and low interest rates helping to offset the cost of acquisitions.

In July, the group bought a controlling interest in Turkish drugs wholesaler Hedef Alliance, while in October it announced plans to take control of German wholesaler ANZAG.

Fairweather said he did not foresee any more major transactions in the second half of the year.

($1=.6225 Pound) (Editing by Sharon Lindores)