Smith to lose up to pounds 7m in book war

BETWEEN pounds 5m and pounds 7m could be wiped from the profits of WH Smith as a result of the book price war, but in the long term the beleaguered retailer will benefit from the demise of the Net Book Agreement, analysts estimate.

The first salvoes in what promises to become a full blown and protracted price war will be fired today when WH Smith and its arch-rival Dillons, Britain's two biggest book chains, unveil big discounts on a range of current best-sellers.

The launch of the price-cutting campaigns follows the collapse last week of the 95-year- old Net Book Agreement between publishers and retailers, which guaranteed minimum prices on titles. WH Smith was one of the NBA's staunch- est supporters.

Waterstones, the high-street book chain owned by WH Smith, is offering discounts of up to a third on 19 titles, including the latest works from authors such as Salman Rush- die, Robert Harris and Martin Amis.

Dillons, the Thorn EMI subsidiary, is cutting the price of the five titles short-listed for the prestigious Booker Prize by pounds 2 from today. Both offers will run for at least a month.

On Monday, WH Smith begins discounting some 60 fiction and non-fiction titles in both hardback and paperback by up to 50 per cent.

Analysts say that WH Smith, the established leader with a 25 per cent share of the UK book market, should emerge as a winner in any drawn-out price war as it can negotiate favour- able one-off deals with publishers. However, they point out that there could be a short-term hit on profits of between pounds 5m and pounds 7m as margins on best-sellers and other titles are sacrificed in favour of increased sales. Such a shortfall would put downward pressure on current pre-tax forecasts of pounds 100m.

Books account for 27 per cent of WH Smith's retail sales in the UK and about one-third of gross profits.

By contrast, any margin pressure at Dillons would have very little impact on its Thorn EMI parent.