WH Smith stays upbeat despite 4% fall in sales

Published on 04/06/2009 21:24

RETAILER WH Smith shrugged off a 4 per cent slide in underlying third-quarter sales with a bullish statement on its full-year trading prospects yesterday.

The group, which sells everything from newspapers to books and stationery, said: "The economic environment remains uncertain and, whilst we continue to be cautious about consumer spending, we are confident in the outcome for the full year."

However, the market noted a like-for-like sales fall of 5 per cent in WH Smith's main high street chain in the 13 weeks to 30 May.

Meanwhile, in its travel business – with outlets at airports, train stations, hospitals and motorway service areas – like-for-like sales were down 2 per cent.

This was worse than the 1 per cent dip in the division's sales at the interim results.

WH Smith said in its trading statement: "Whilst airport passenger numbers have, as expected, remained soft, we have outperformed."

The group's shares closed down 7.75p at 425.75p.

In its statement yesterday, the retailer also said that its balance sheet remained strong and that it continued to generate high levels of cash. Total sales, incorporating new floorspace, were up 1 per cent in the period.

City retail analysts said the dip in underlying sales was slightly better than expected.

John Stevenson, retail specialist at broker KBC, said: "Smiths' numbers are pretty robust with high street sales marginally better than we expected, but airport demand proving to be tough.

"Smiths is one of the few retailers we expect to deliver profit growth this year because there are still cost savings to come through and demand in travel should pick up."

However, Seymour Pierce retail analyst Freddie George said the performance of the travel business gave cause for concern.

George said: "We remain concerned that the travel business, which now accounts for almost 50 per cent of profits, will see some impact from the economic slowdown on the railway stores, while the weak currency is likely to lead to lower footfall through the airports."

Yesterday's trading update from the group had little impact on the City's consensus expectation for WH Smith to make an annual profit of 80 million in the year to end-August, up from 7 4m.