City File: Anxious market misreads the signs

WITH the stock market in a state of high anxiety, dealers are prepared to believe almost anything they hear about anybody. The result is that even the shrewdest strategic move can be wildly misinterpreted. Take Lloyds Chemists, the once popular Midlands-based high street chemist and health food group. Its recent purchase of 89 Cavendish & Castle card and newsagent shops from the receiver for pounds 2m was read in the market as a sign that Lloyds was diversifying. In fact, all Lloyds was doing was picking up sites at a bargain basement price for conversion to drugstores and health food shops, its successful core businesses. Of the 89 shops, 43 will join the Holland & Barrett chain and 15 will become Lloyds Supersave drugstores. The rest will be sold or put to alternative use. The cost of conversion is estimated at pounds 2m to pounds 3m.