WH Smith focuses on margins as sales fall

WH Smith hailed its resilience today as departing chief executive Kate Swann continued the retail chain’s focus on profitability over sales.

Like-for-like revenues fell 5 per cent in the 20 weeks to 20 January but with close management of margins and costs the company said it still delivered a “good” profits performance for the period.

It is a formula that has worked well for the company, which operates 618 stores on the high street and a further 619 at travel sites such as airports, train stations and motorway service areas.

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Shares rose more than a third last year but dipped 2p to 650p yesterday despite analysts backing the company’s strategy.

In October, WH Smith’s profits lifted 10 per cent to £102 million, compared with the £135m loss it made in 2004 prior to Swann’s appointment. The figure is expected to rise to £106m in this financial year.

Swann has shifted the company’s focus away from lower-margin CDs and DVDs towards books and stationery, as well as reducing dependence on the Christmas season and the need for heavy discounting.

However, she disappointed investors in October by announcing plans to leave the group. Swann will hand over the reins to Steve Clarke, who is managing director of the high street division, having joined the group in 2004.

Swann said she expected trading conditions to remain challenging but that the firm’s resilience and profits record meant she was confident of further growth.

Seymour Pierce analyst Kate Calvert said: “There is still plenty of growth, particularly in travel and internationally, and the high street market position is probably strengthening given recent administrations.”