RETAILER WH Smith revealed plans to launch a chain of budget card shops today as its ongoing focus on margins delivered another jump in profits.
The firm said it would trial “a small number of standalone greeting cards stores” branded as “Cardmarket” and based in “non-prime” locations.
“In contrast to our existing greeting cards offer, which is at the premium end of the market, these stores will provide customers with a value-based proposition in this growing part of the market,” it said.
“The trial will be in relatively low-rent, short-term leases in non-prime pitch locations.”
The announcement came as WH Smith posted a 9 per cent rise in full-year profit and announced a new £50 million share buyback following a record year at its travel division, which trades from concessions in airports and railway stations.
The firm, which also lifted its dividend by 14 per cent to 35p, posted pre-tax profits of £112m for the 12 months to end of August, up from £103m a year ago.
WH Smith’s established pattern of declining sales accompanied by profit margin gains continued, with full-year sales down 2 per cent but margins up 160 basis points due to a more profitable product mix and tight cost controls. Total sales at its travel arm rose 4 per cent, helped by improving passenger trends. Its high street division saw a 6 per cent slip in sales but still managed to grow earnings, as it trimmed its estate from 615 outlets to 604.
Chief executive Stephen Clarke said: “In our high street business profits increased by 4 per cent to £58m, demonstrating the continued success of our profit focused strategy.
“Our focus will remain on profitable growth, cash generation and investing in new opportunities that position us well for the future.”
The new greetings cards stores will be one of several group trials, including franchise partnerships with newsagents and food-to-go in rail stores. The company said it had made “further progress” with its franchising trial, extending the number of partner stores using the WH Smith Local to 30.
It also continued to expand its fledgling international business, adding 30 overseas stores at locations such as airports to take its tally to 165.
Analysts at Barclays said: “Despite operating in a market where some of its categories are under considerable pressure, we believe the company’s attention to detail and diversification should ensure the strong track record of cash returns and earnings growth to continue.”
Kate Calvert, at Investec, said the latest figures were “a small beat to consensus”.
“The highlight has to be travel’s return to positive growth in the fourth quarter, for the first time since 2008. It remains the driver with high street robustly delivering another year of profit growth.”