John Menzies fears outcome of price war: Long-term interests of newspaper industry at risk, says retailer

PRICE wars in the broadsheet newspaper market are not in the long-term interests of the industry, according to John Menzies, the high street retailer and leading wholesale newspaper distributor.

' If the main players involved in price-cutting end up making the sort of profits that will benefit the newspaper publishing industry then we can look forward to improved business. But I fear that this may not happen,' Ranald Noel-Paton, group managing director, said.

The broadsheet newspaper market had responded positively to recent price cuts by the Daily Telegraph and Times and John Menzies' wholesaling operation had not suffered because publishers had not changed contractual arrangements with wholesalers.

'If this continues then I do not see our position being diminished. But it would be unwise to expect this situation to continue.'

Mr Noel-Paton was speaking as John Menzies announced a 12 per cent rise in pre-tax profits to pounds 34.4m on sales 7.7 per cent higher at pounds 1.23bn. The dividend is 9.3 per cent higher at 11.8p with a final of 7.7p.

The John Menzies retail chain continued to perform poorly and is believed to have moved from a small profit to a small loss despite a 5 per cent increase in sales. That led to only a marginal increase in overall retailing profits to pounds 11.2m despite further strong growth at Early Learning Centres. Sales at ELC rose 7 per cent on a store-for- store basis to about pounds 115m.

After a successful debut with two superstores, incorporating new nursery and clothing ranges alongside the traditional books and toys, 10 more conversions of existing stores are planned this year.

Following a costly move into the US, ELC is pursuing international expansion into the European market place with stores in Ireland and Holland.

John Menzies retail suffered from a depressed market in 1993/4 for newspapers, books, stationery and confectionery, while the more buoyant home entertainment market attracted intense price competition.

About seven stores in the 263- strong chain have been revamped in a two-year, pounds 320m refurbishment programme to help it compete with specialist retailers but little impact on profitability has yet been seen. Distribution profits rose 15 per cent to pounds 24m on the back of strong growth in magazine and periodical sales.

The stockbrokers Bell Lawrie White forecast pre-tax profits of pounds 37.5m in 1994/5 and an 8.5 per cent rise in dividends to 12.8p.