WH Smith lifts profit under pressure: Mixed figures from retailers as Next forecasts sales surge but William Low sounds warning

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The Independent Online
A GRADUAL improvement in consumer confidence combined with increased productivity to push pre-tax profits at WH Smith, the retail and distribution group, up 11.2 per cent to pounds 44.7m for the six months to November.

There was also good news from Next, the fashion group, which said it expected sales in the six months to 31 January to be 18 per cent higher than last year. Its Directory mail order catalogues have produced 9 per cent growth.

But William Low, the Dundee- based food retailer, warned that its interim profits were likely to be lower than expected. Its sales in the first 20 weeks of the year have fallen by 1.5 per cent excluding new space, although store openings have pushed the total up by 3.5 per cent.

It also announced 41 redundancies at its head office, about a tenth of the staff there, and further cuts are likely at its branches and distribution depots. Its shares dropped 17p to 174p.

At WH Smith, Sir Malcolm Field, group managing director, said the group's music, video and stationery businesses had all suffered over the period because of fierce price competition. He said the group continued to offer value for money to its customers and in some areas, such as videos, it was leading the price promotions.

Despite these pressures, WH Smith's sales rose 6.6 per cent to pounds 1.1bn. The UK retailing business - excluding Virgin - achieved a 6.4 per cent increase in sales, while profits were 4.5 per cent higher at pounds 32.2m.

Video, helped by the price promotions, and book sales were particularly strong, rising by 16 and 9.4 per cent respectively.

In newspaper, magazine and office equipment distribution, profits rose 14.2 per cent to pounds 18.5m on sales 4.2 per cent higher at pounds 497.6m. Sir Malcolm attributed the profit rise to the group's decision to cut the number of magazine houses it serves by 17, which meant that productivity improved.

In the US, profits slipped back to pounds 4m as hotel occupancy declined - the group has more than 200 shops within hotels. However, sales in December and January showed signs of improvement.

Do It All lost pounds 8.3m, similar to last year's loss, although Sir Malcolm said sales had been improving in the last three months of 1993. The group is close to agreeing the sale of a number of shops, but warned that there are likely to be provisions for these disposals in the full-year accounts.

Earnings per share were 7.4 per cent higher at 11.6p and the interim dividend is increased from 4.3p to 5p. That is partly to rebalance the interim and final payments. The shares closed 6.5p lower at 530.5p.

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