Tinkering with characters won't change plot

WH Smith had the chance to deliver a robust response to May's profits warning yesterday, but duly fluffed it. The malaise creeping into one of Britain's best-known high street names demanded an injection of fresh ideas with an external appointment. Instead, the board has reshuffled its pack by promoting from within. A couple of non-executive directors have gone, a few known faces have been promoted from within. Nothing to rock the boat.

Instead of a big strategic re-think to take Smith into the late 20th century, the board has offered a half-baked pounds 5m refurbishment programme over 400 stores, scarcely enough to buy each of the stores a new carpet. If there was any doubt, it is now clear nothing will change at Smith until changes are made at the top. Its problems are largely cultural. From its origins in the 18th century the company built up such a strong market position that it seemed impregnable.

But as so often happens to once successful companies, it stood still as the market changed around it. Now it finds its core high street chain squeezed on two sides, by super markets on one hand who are moving more and more into magazines and books, and by specialists such as Dillons and HMV on the other. Smith is also cannibalising its own stores with its Waterstones and Our Price formats which compete directly with its traditional outlets. It is a bit like robbing Peter to pay Paul.

As a family-run company Smith was, and remains. conservative. Employees join young and gradually work their way up. Meanwhile the Smith family, which still owns 11 per cent of the shares and has a seat on the board, keeps a watchful eye. In many ways WH Smith resembles a publicly-quoted Littlewoods, where outsiders are tolerated but always remain outsiders.

Sir Malcolm Field joined the company in 1968 and has been on the board for 13 years. His predecessor, Sir Simon Hornby, was at Smith for his entire working life. Current management appears to be doing little more than holding the line while it engineers a dignified exit for Sir Malcolm, due to retire next year. Head-hunters have been appointed but Smith insists Sir Malcolm will stay on until mid-1996 to oversee the changes. According to the chairman, Jeremy Hardie, the need at present is for continuity. It is hard to agree and indeed no one outside such a paternally run organisation would. WH Smith and its shareholders need a year-long hiatus like a hole in the head. Now is the time for new brooms.

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