WH Smith to put sandwiches on the menu

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The Independent Online

First, WH Smith installed coffee shops in some of its largest stores. Now the stationery-to-magazines retailer is preparing an assault on the lunchtime sandwich market.

The group, which is splitting its retail division from its newspaper wholesale arm, is planning to sell a range of sandwiches and other snacks from its high street stores in its latest bid to arrest its sales decline and boost its profit margins.

It is likely the group will seek to exploit the ethical shopping trend when it launches its new food range, by handing the contract to Foo Go, a snack producer that likes to use locally sourced and organic ingredients.

Foo Go, which was set up in 2001 by George Robinson, has worked with Smiths for the past three years after it displaced Marks & Spencer to supply the retailer's travel outlets in railway stations and airports. During that time, the sales of Foo Go's products in Smiths' stores have climbed by 50 per cent each year.

Following a successful trial, Smiths is understood to be finalising its plans to roll out its sandwich offer across the UK. It is likely to focus on its largest high street stores, which it has already admitted it has trouble filling, rather than offer a snack range in all of its 675 high street outlets. It declined to comment.

Smiths is one of the rare retailers not to have joined the ethical business debate raging in the sector. Yet it was an early backer of Foo Go, which uses biodegradable sandwich and salad packaging. "For a blue chip to undertake that kind of position is quite forward-thinking," Mr Robinson said.

Kate Swann, WH Smith's chief executive, has restored the retailer's underlying profit growth but cannot stem the slide in its sales. While the City is impressed by her work so far, most analysts remain sceptical that Smiths has a viable long-term future in its current form.

Steve Davies, retail analyst at Numis Securities, said selling sandwiches would "help to grow the gross margin, which is a key part of the profit story for the high street business".

Smiths' other plans to use its excess floor space include opening Costa Coffee bars in 20 stores. From this autumn, it will test demand for a range of Post Office services, including car tax, foreign exchange and passport applications.