WH Smith pays the price for poor Christmas sales

WH Smith shares fell to their lowest level for 13 years yesterday when the high street retailer announced a drop in underlying sales over Christmas. The company said it had made a deliberate decision not to chase unprofitable sales in areas such as CDs in order to build margins instead.

But analysts cut their profit forecasts and said Smiths was being squeezed between the major supermarkets on one side and specialist stores such as HMV and Waterstone's on the other. "The market is getting tougher and they have lost their top line (sales) momentum," one analyst said. "They are going to struggle to grow the top and bottom lines at the same time." The shares closed 12.25p lower at 284p.

Smiths said that in the five weeks to 11 January UK like-for-like sales were down 2 per cent on the same time last year. Underlying sales in the main high street chain were down 3 per cent though margins were up 2 percentage points.

Entertainment sales were down 6 per cent as the company refused to match what it described as the "kamikaze" pricing of CDs at £9.99 by rivals such as Tesco. Richard Handover, the chief executive, said: "Take the VAT out of that and you're selling at a loss."

Analysts were concerned about a 3 per cent fall in book sales. This was largely in fiction where Waterstone's ran strong Christmas promotions.

Analysts were gloomy with ABN Amro, Smith's house broker, cutting its current year profit forecast from £128m to £120m.

Nick Bubb, retail analyst at Evolution Beeson Gregory, said: "It's déjà vu. Every time Smith's reports, there are downgrades. They clearly got the trade-off (between sales and margins) wrong in UK retail with losses of market share in key areas."

But Mr Handover expressed cautious optimism in Smiths. "The principle we adopted was to not chase sales at the expense of margin. We may have over-compensated a little but the problem is tactical not fundamental." On the outlook for consumer spending, he said: "We are managing the business in anticipation of a continuing difficult and uncertain environment."

Suggested Topics
PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SQL Developer with T-SQL, Watford, Hertfordshire - £350 - £360

£350 - £360 per day: Ashdown Group: SQL Developer with T-SQL, Watford, Hertfor...

Chief Financial Officer

120-150k: Accountancy Action: We are looking for an experienced CFO from a min...

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...

Day In a Page

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker
Renée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity

'Renée Zellweger's real crime was to age'

The actress's altered appearance raised eyebrows at Elle's Women in Hollywood awards on Monday
From Cinderella to The Jungle Book, Disney plans live-action remakes of animated classics

Disney plans live-action remakes of animated classics

From Cinderella to The Jungle Book, Patrick Grafton-Green wonders if they can ever recapture the old magic
Thousands of teenagers to visit battlefields of the First World War in new Government scheme

Pupils to visit First World War battlefields

A new Government scheme aims to bring the the horrors of the conflict to life over the next five years
The 10 best smartphone accessories

Make the most of your mobile: 10 best smartphone accessories

Try these add-ons for everything from secret charging to making sure you never lose your keys again
Mario Balotelli substituted at half-time against Real Madrid: Was this shirt swapping the real reason?

Liverpool v Real Madrid

Mario Balotelli substituted at half-time. Was shirt swapping the real reason?
West Indies tour of India: Hurricane set to sweep Windies into the shadows

Hurricane set to sweep Windies into the shadows

Decision to pull out of India tour leaves the WICB fighting for its existence with an off-field storm building
Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?