Smith's shares were marked down 15p to 440p as it reported pre-tax profits for the six months to 28 November of pounds 40.2m, blaming losses at its Do It All chain. City analysts had expected about pounds 45m.
Smith's share of DIA, which is owned jointly with Boots, lost pounds 8.4m, compared with a pounds 900,000 deficit last time. DIA sales shrank from pounds 97.9m to pounds 95.2m. Sir Simon Hornby, Smith's chairman, blamed the depressed housing market and the intense price competition.
Sales in Our Price music shops fell 1.3 per cent and the chain made 'a slight loss'. After stripping out the benefit of new space, the trend sales decline was 8.4 per cent. Sir Simon blamed high CD prices and a shortage of new material: 'The chart is a bit old hat at the moment.'
Sales of pre-recorded videos unexpectedly fell by 5 per cent, partly hit by a switch in spending to computer games. Smith recently opened a pilot shop specialising in videos.
Elsewhere in the group the core WH Smith chain lifted sales by 3 per cent. Waterstone's bookshops raised profits by one-third. The newspapers and office products distribution division lifted trading profits by 8 per cent.
Sir Simon said poor November sales were responsible for pounds 3m of the profits decline. Redundancies cost another pounds 2m, which would be more than recouped in a lower wages bill.
Earnings per share fell from 14.5p to 10.8p. The dividend was held at 4.3p.
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