WH Smith profits rise after promotions halted
WH Smith today said annual profits from its high street stores almost doubled after halting unprofitable promotions and putting more emphasis on books and cards.
The retailer said its 669 branches generated profits of £43m (€62.6m) even though like-for-like retail sales dropped 2% over the 12 months to the end of August.
Chief executive Kate Swann said the “substantial” improvement was due to WH Smith pushing sales of its most profitable items such as books, stationery and greetings cards.
At the same time, the retailer stopped trying to challenge the supermarkets head-on by offering suicidal discounts that eroded profits rather than increased them.
Progress at its news distribution business meant group pre-tax profits lifted 59% to £73m (€106m), which Ms Swann said was at the top end of analysts’ expectations.
Commenting on trading in the six weeks to October 8, she said total retail sales were down 2% and news was 1% lower than the same stage of last year.
Ms Swann said the sales fall was not at odds with the recovery plan put in place after she picked up the reins of the 203-year-old retailer at the start of January last year as it careered towards annual losses of £135m (€196.6m) at the bottom line.
“Our plan was not based on sales growth – it was on getting the cost base of the business in good shape and changing the mix (of the products),” she said.
WH Smith was not anticipating any pick-up in consumer spending before Christmas or the rest of this financial year and assured investors that it had planned accordingly.
“Once consumer spending is back to normal then our market is growing by between 2% and 3% so if we just hold our market share then we should see that growth and maybe more,” Ms Swann said.
In addition to a 14% increase in the dividend, WH Smith also cheered shareholders with the news that it had found £18m (€26,2m) of extra savings that would shield it from cost pressures such as rising salaries and energy bills until 2007.
This is on top of the £30m (€43.6m) of savings over three years identified in the initial recovery plan – £18m (€26.2m) of which have already been stripped from business.
