Focus on margins at WH Smith pays off as profits remain stable

CONCENTRATING on higher-margin goods has helped high street retailer WH Smith to maintain its profits despite a fall in sales, the firm said yesterday.

Chief executive Kate Swann has shifted the company’s focus away from lower-margin CDs and DVDs since joining in 2003 and reduced its dependence on the Christmas season.

Her strategy appears to be paying dividends as it stays on course to hit full-year City forecasts thanks to improving profit margins at both its high street shops and in-travel stores during the 21 weeks to 21 January.

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The up-beat news came despite a 6 per cent drop in sales at its high street stores, where analysts said a poor selection of celebrity biographies is likely to have dented trade, and a 3 per cent drop across its shops in railway stations, airports and motorway service stations.

Swann has also reduced the number of special offers. She said: “Over the past six years both businesses have consistently increased profits and the group is now well balanced between travel and high street.

“As a result of this, the months of November and December now represent less than half of annual group profit compared to over 90 per cent of group profit six years ago.”

The decline in the group’s like-for-like sales eased to 5 per cent from 6 per cent in the ten weeks to 5 November.

Retail analyst Nick Bubb said: “WH Smith always get criticised for its declining like-for-like sales, but never gets the credit for engineering a richer sales mix – I reckon gross margin has gone up by at least 1,200 basis points since Swann took over.”