Smith's torture on the rack

Patrick Hosking talks to the man in charge of reviving the retailer
PETER BAMFORD is frank about the past performance of the WH Smith chain. "We've disappointed our shareholders. We've disappointed the analysts. We've disappointed ourselves."

Bamford, the chain's managing director, has one of the most challenging jobs in the high street. His task is to reverse a decline which many in the City see as irreversible - to breathe life into one of the market's most venerable but vulnerable dinosaurs.

Smith's is under attack on two sides. Supermarkets are nibbling into its core market, knocking out best-selling books, CDs, videos and greetings cards.

On its other flank, Smith's continues to lose market share to specialist stores - booksellers like Waterstone's and specialist music and video stores like Virgin and Our Price. It only adds to Bamford's indignity that some of these specialists are owned by the wider WH Smith group. Smith's is being cannibalised.

The attacks show through in the results. The chain - still the biggest contributor to group profits - made operating profits of pounds 65m in the year to May, down from pounds 77m the previous year. Sales were flat at pounds 915m, but the number of people visiting the stores was down by 3 per cent.

Bamford, who bears more than a passing resemblance to one of his best- selling authors, Jeffrey Archer, denies the chain is in terminal decline. Despite the poor performance, it attracts 7.5 million shoppers a week and boasts a 6 per cent net margin - profitability rivals would kill for.

"However," he says, "we've been a bit passive with our merchandising. Customers like to be informed, tempted, invited, helped. Those are things we've not been actively doing."

A guided tour of the Sloane Square store demonstrates what Bamford is doing to change things. The shop is brightly lit, inviting, well-signposted and awash with enticing displays for Christmas. The demise of the Net Book Agreement, the price-fixing arrangement for books, is evident. More than 100 titles are discounted. Delia Smith's Winter Collection is being promoted at pounds 9.99. Nigel Mansell peers out of a cardboard hoarding to advertise his pounds 12.99 autobiography.

Of course, the store is hardly typical. Located 30 paces from group headquarters, it is bound to be well turned out. Across town on King's Cross station the WH Smith outlet tells a different tale: grubby, cramped, uninviting. The refurbishment scheme has a long way to go.

Bamford, 41, came to Smith's via Fine Fare, Tesco and Woolworth. He earned his spurs in the WH Smith group by developing its US music chain in the late 1980s. In February 1994 he was called back to Britain to head up the core WH Smith chain. Last month he joined the group board.

He refuses to be fazed by the march of the supermarkets. "At the end of the day their business is food retailing. They have to maintain the authority of their range in mainstream food retailing. There's a limit to how much else they can tackle."

And he is relaxed about the inroads made by specialist sellers. Many shoppers are intimidated by specialist bookstores, he says. Smith's still has a role as seller of bestsellers and books as gifts - catering for the 65 per cent of the population who are not regular book buyers.

Promotions can still generate spectacular response. In October Bamford offered a free paperback to shoppers spending more than pounds 20. No less than 200,000 customers took up the offer.

But there remain many who see Bamford's efforts as mere tinkering. According to John Richards, stores analyst with NatWest Securities: "The Smith's chain's problems are strategic and structural, not managerial. Bamford is fighting a rearguard action. He will be deemed to have done well if he just stems the decline."