Swann rules out break-up as WH Smith feels the pinch

LOW average transaction values at high street stationery chain WH Smith failed to insulate the group over Christmas from consumer uncertainty about the economy, it emerged yesterday.

It came as WH Smith chief executive Kate Swann told the market there were no plans to sell its faster-growing travel business, but that nothing could be ruled out if it added to investor value.

The company revealed that sales at its high street stores open more than a year fell 4 per cent in the 21 weeks to 23 January, while like-for-like sales at the travel business fell 2 per cent. Smith's average transaction value is about 5 in its high street business and about 3.50 in travel, so it has tended to be less affected than other retailers by recession.

One analyst said: "Consumers are counting the pennies on even low-value purchases. Smith's business model is defensive, but this shows it is not totally isolated from the economy backdrop." On a positive note, gross profit margins rose 1.5 per cent in both businesses. Swann's strategy has been to cut costs and improve margins by focusing on more profitable products and better control of markdowns.

She has rebalanced products towards core categories and away from entertainment products in highly-competitive areas such as CDs, DVDs and computer games.

The City estimates that the company –with 565 high street stores and a 490-store travel division that trades from airports, train stations, hospitals and motorway service stations – would have a break-up value above 600p per share.

But Swann said: "There are absolutely no plans to do it. However, if … we thought it would create value, then we want to leave that option open."