WH Smith is paying Kate Swann, its new chief executive, £1m in compensation for the benefits and bonuses she left behind at GUS. The award doubles her potential salary package to just under £2m.
Ms Swann, the former head of Argos, joined the news and books group last month, charged with transforming the struggling retailer's performance.
Her annual salary will be £475,000, but she can double this through the company's bonus scheme if targets are met.
Analysts reckon Ms Swann will have her work cut out, with many believing that the retailer no longer has a niche in today's crowded high street. Fierce competition from supermarkets selling cut-price CDs and books, as well as from specialist retailers, saw WH Smith struggle last year. Sales were flat and full-year profits sharply lower.
"I don't envy her her task," one retail analyst said. "As a legacy retailer, WH Smith may have customers' trust but it doesn't have the god-given right to make profits."
Details of Ms Swann's salary package emerged in the company's report and accounts, published yesterday.
They also showed that Ms Swann, 38, will be granted options over some £1.5m of shares under its executive share option scheme. She will receive her compensation payout in two tranches, half in cash on 1 September, 2005, and half in shares a year later, provided she is still employed by WH Smith.
Before joining GUS, Ms Swann headed Homebase but left when J Sainsbury sold the do-it-yourself chain to Permira. She succeeds Richard Handover at WH Smith, although Mr Handover will remain with the retailer until January 2005 as chairman.
Analysts said Ms Swann's major challenges included adopting a coherent strategy, rather than veering between chasing first sales and then margins, and shaking up the group structure.
One noted that there was "no logic and few synergies" to owning retail operations in Asia Pacific as well as the UK. He also queried exactly what WH Smith's newspaper distribution and publishing arms brought to the group.
Christmas - accounting for 75 per cent of the retail division's annual profits - is expected to be especially tough for WH Smith, with margins set to come under severe pressure. It has been pushing its expanded lines aggressively via a number of promotions.
The report and accounts also showed that the board's total wage bill had fallen by one fifth to £2.1m. Mr Handover's total salary package was 17 per cent lower at £554,000, although the transfer value of his pension pot increased by £691,000 to £4.7m.
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