Healthcare retailer Boots has reported a drop in profits after cutting costs to keep pace with supermarkets.

The group, Britain's biggest health and beauty retailer, was nonetheless upbeat about its prospects for the rest of the year.

"I am confident that we will deliver a full year performance in line with our expectations at the start of the year," said chief executive Steve Russell.

Nottingham-based Boots reported a 2.8% fall in profits for the six months to 30 September to �279.6m.

This was at the top end of analysts' expectations of between �270-280m.

Taking on the supermarkets

Boots has embarked on a �170m refurbishment programme to update some of its older stores over the next four years.

It is trying to keep pace with the increased sale of health products in larger supermarkets, as more relaxed rules on the sale of over-the-counter medicine mean fewer customers need to visit a specialist retailer.

Critics have suggested Boots is wasting money experimenting on new areas such as laser eye currency and luxury beauty treatments.

But chief executive Steve Russell defended the claims and told BBC News that the company "has a real opportunity to capitalise on the strength of the brand".

Mr Russell said the current high levels of spending were being used "to drive longer term growth".

Convincing the market

Analysts seemed less sure and questioned the price Boots was paying to maintain sales.

Iain McDonald, retail analyst at Numis Securities, said the sales at the current level were "not sustainable".

The market also questioned Boots' identity after its numerous attempts to expand the company's product range from its traditional health and pharmacy products.

Boots has already had to curb its plans to reinvent itself into a luxury cosmetics and treatment chain.

It had originally planned to roll out a chain of 60 'Pure Beauty' outlets, but now says these will be incorporated into its chemists.

Investors also appeared unconvinced, with shares falling 3% to 582p.