WH Smith's back-to-basics approach pays off retailer reveals an 8% leap

Published on Thursday 15 October 2009 21:47

WH SMITH boss Kate Swann's decision to take the high street retailer back to basics has paid off in an 8 per cent surge in annual profits.

Swann's efforts to move away from the competitive entertainment market and refocus on books, stationery and confectionery was credited for the jump in profits to 82 million, achieved against a 5 per cent fall in like-for-like sales.

The strong performance means the retailer returns 35m to investors through a share buy-back and a 17 per cent increase in the full-year dividend to 16.7p.

WH Smith's travel division, which operates almost 500 outlets at airports, railway stations and motorway service areas, performed particularly well, growing operating profits by 17 per cent to 48m during the 12 months to 31 August. The group announced yesterday that it was expanding its travel operation to open six outlets at Delhi airport in India next year. It began overseas airport trials at Shannon, Copenhagen and Stockholm- Arlanda earlier this year.

By comparison, operating profit at WH Smith's high street division was up 4 per cent to 49m.

Total revenues fell 12m to 1.34bn, but the company said it had identified a further 14m of cost savings. As well as moving away from products such as CDs and DVDs, Swann is on a drive to improve sourcing and take better control of markdowns.

Due to its low average trans-action value, analysts say WH Smith has tended to be less affected by the recession compared with other big-name retailers. The average transaction at its high street business is 5, while travellers spend an average of 3.50 at its rail and airport outlets.

Swann said: "We have delivered another strong performance, with group profit up 8 per cent per cent to 82m, despite challenging trading conditions. Operating performance was ahead of expectations in both our travel and high street divisions.

"Whilst trading conditions are challenging, we have planned accordingly and the group is well positioned to benefit when consumer spending recovers." The Altium Securities analyst David Stoddart was impressed by the results.

He said: "The company's resilience in the face of difficult trading conditions and its leverage into a recovery, courtesy of its travel division, represent an attractive combination."

Swann's success at WH Smith has prompted speculation in the City that she could be a successor to Sir Stuart Rose at the helm of Marks & Spencer.

Bookmaker Ladbrokes has her down as a 12/1 shot. When asked about the M&S role yesterday, Swann said: "I've never commented on speculation and I don't plan to start now."