WH Smith profits soar but stock slides amid Christmas worries

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The Independent Online

WH Smith yesterday said that its pre-tax profits had soared by 72 per cent to £76m, but the shares slid as the company gave a bleak assessment of its Christmas prospects.

Sales also continued to fall – with overall revenue down to£1.3bn from £1.34bn – as the chief executive Kate Swann warned: "In an uncertain consumer environment we expect the key Christmas season to be very competitive." Ms Swann said that the company had "planned accordingly" but investors took no comfort from this and its shares finished the day 27p lower at 393p.

The pre-tax figure – for the year to 31 August – was boosted by one-offs and, stripping out exceptionals, came in at £66m, up just 21 per cent. Same-store sales also continued to slide, falling 6 per cent, although the travel business has continued to do well with same-store sales up 2 per cent.

Book sales improved by 1 per cent, but that was chiefly thanks to the success of JK Rowling's Harry Potter and the Deathly Hallows – the final book in the series. Without it, they would have been flat.

Smiths said the overall sales fall came as a result of its decision to focus more on books, stationery and newspapers and magazines at the expense of entertainment. This switch has helped fuel a rise in profits because, while overall sales have been lower, margins have improved. The company also said it had made savings of £10m and identified a further £11m.

But analysts at Landesbanki said: "Management's strategy of tight cost-control and margin advancement continues to offset sales declines; our concerns lie in the longer-term outlook, when top-line growth must return if Smiths is to compete with supermarkets and online players."

WH Smith will pay a final dividend of 8.1p, bringing the total for the year to 11.8p.

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