WH Smith profits up despite falling sales

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The Independent Online

Sales at WH Smith fell for the sixth year in a row, but profits at the retailer rose 6 per cent as its new chief executive Steve Clarke continued the focus on cost-cutting established under his predecessor Kate Swann.

Shares in the company still jumped more than 5 per cent to 882p as WH Smith increased its dividend by 15 per cent and promised to spend another £50m on share buybacks. That means a total of £536m handed back to shareholders since 2007.

Mr Clarke revealed sales fell by 5 per cent to £1.19bn. Like-for-like sales dropped 6 per cent at its high street stores while its travel stores in airports, stations and hospitals lost 4 per cent.

However, pre-tax profits rose by 6 per cent to £108m, up 5 per cent in travel and 4 per cent in its high street business. A further £22m of cost savings will be made over the next three years in its high-street portfolio, but Mr Clarke insisted this would not be at the expense of staff cuts or under-investment in stores.

There had been criticism that some of the high street stores were starting to look rundown and tired, with a Twitter campaign highlighting the state of some floorings.

But Mr Clarke said: "I'm not sure I accept the premise. We have 615 stores and we have a lot of lovely stores. The ones highlighted on Twitter were earmarked for new carpets already. We have a very high footfall and a very high carpet turnover."

Four new high street stores were opened during the year, while in travel WH Smith launched 30 new stores in the UK and 40 overseas, with 47 more due next year.

Mr Clarke admitted that the gulf between its high street and travel operations would continue to widen, citing more opportunities for growth in the latter. He also revealed that the 82 Post Office branches in stores would remain for another five years and a further 16 would be added.

Meanwhile, WH Smith has been forced to restate last year's results after it was told by the Financial Reporting Council (FRC) that it had incorrectly reported its pension contributions. The FRC said these should have been added to its overall liabilities. It means WH Smith reduced net assets from £145m to £95m in 2012 and cut profit after tax by £4m, although pre-tax profits were unaffected.