Boots plans to merge with Alliance Unichem in a �7bn deal next year

Boots - which is seeking to merge with Alliance Unichem - said pre-tax profits for the six months to 30 September were down 9.6% to �163m ($289.6m).

Boots said profits had been hit by a �45m increase in operating costs as it revamped its core operations.

Like-for-like sales at its Boots the Chemist outlets dipped 1.3%, but international sales rose by 13.3%.

Price cuts

The market is expected to remain tough through the rest of the year Richard Baker, Boots Check Boots' share price

Pre-tax profits at the group excluding its healthcare business - which it has agreed to sell to Reckitt Benckiser in a �1.93bn deal - came in at �151.8m, in line with forecasts.

Under its current shake-up plans, Boots has been cutting prices on 700 lines, in an effort to change customer perceptions that they are too high.

Its efforts buoyed its beauty sales by 3% to �923m and resulted in a slight 0.6% rise in healthcare sales to �936m.

Looking ahead, the company said it expected conditions to remain harsh.

"As we stated... like-for-like sales in the first half are below the rate planned for the full year and the market is expected to remain similarly tough through the rest of the year," said chief executive Richard Baker.

Many UK retailers have been struggling in recent months amid a consumer spending slowdown, prompting stores to slash prices in an effort to lure in shoppers.

Store shake-up

Mr Baker added Boots would continue its strategy of cutting prices by an average 11%, a move that would increase the firm's full year costs to an estimated �90m.

Mr Baker and his team have also begun a marathon roadshow to convince investors of the benefits of the group's proposed tie-up with Alliance Unichem.

"My sense is that after the initial surprise, there's been a shift in the tone of meetings to shareholders wanting to understand the possibilities it creates. I think they're starting to get it," Mr Baker told reporters.

The merger, worth �7bn, will create one of Europe's largest drugs, beauty and healthcare groups with sales of more than �13bn and 2,600 stores across the UK.