WH Smith, the beleaguered high street group, announced 1,000 job losses, a boardroom shake-up and a rapid roll-out of a store refurbishment programme yesterday along with a poor set of trading figures for last year. However the changes were immediately criticised in the City as insufficient to restore the fortunes of the group.
The company is shedding 500 jobs at its newspaper wholesaling division, 400 at its business supplies subsidiary and 150 at its head office in Swindon. The chief executive, Sir Malcolm Field, said the job losses - not all compulsory - would affect profits in the first six months of the current year but declined to give a figure.
The board changes see four divisional directors step up to the main board with two of the seven non-executives standing down. Janet Morgan and Lord Windelsham will retire from the board at the annual meeting in October. They will be replaced by Pepert Bamford, head of WH Smith retail, Simon Burke of Virgin-Our Price, John Hancock of WH Smith USA and Richard Handover, head of WH Smith News. All the new appointees are in their 40s, compared with existing executive directors, who are in their late 50s.
Explaining the changes, Jeremy Hardie, aged 57, said: "It will bring the average age down quite a bit. You ought to have young people to help make the board more in touch with what is going on." However, he denied that the existing board had lost touch or that other changes were imminent. Responding to calls for higher-level changes, he said Sir Malcolm, who is 58 tomorrow, would stay on until the middle of next year to oversee the changes.
But City analysts, who had been hoping for an external appointment to inject fresh ideas into the company, criticise the changes as too little too late. John Richard, retail analyst at NatWest Securities, said: "I don't feel these changes are any more than cosmetic. It does not address the real issues. What is required is a major cultural change, not internal promotions. What we were looking for was an appointment of a new chief executive." Tony Shiret of BZW said the strategy lacked credibility and the company was struggling to adapt to the more aggressive retail environment of the 20th century.
Mr Hardie said top-level changes were not immediately necessary: "I believe Malcolm is a excellent chief executive and it would simply be posturing to recruit someone from the outside to change things. It might have looked spectacular but actually been a handicap."
Mr Hardie said Sir Malcolm would stay to oversee the implementation of the project enliven programme, which was announced in May. Yesterday the company added further details to the strategy, saying it would spend pounds 5m on a refurbishment programme that would upgrade 400 of the group's 537 stores by October. This includes adding children's play areas and multimedia sections that specialise in CD-Rom PCs and software. "This market will fizz some time and its important we are in early rather than late," Mr Hardie said. However Smith was criticised for spending pounds 250,000 on one flagship store at Holborn Circus in London that analysts were being encouraged to visit but only an average of pounds 12,500 on the other stores.
The company's results for the year to June were in line with the company's announcement in May. Pre-tax profits fell from pounds 124.8m to pounds 115m on sales up 10 per cent to pounds 2.7bn. The root of the company's problems has been the core high street chain, which saw profits slump by 16 per cent to pounds 65m. The company blamed weak consumer confidence, lower footfall on the high street, and a shift away from higher-margin items for the fall, although competition from supermarkets has also been a factor.
Multimedia departments are now in 33 stores and will be in 75 by October. More than 30 children's areas have been added since May. Advertising will be increased from pounds 7m to pounds 10m for the core chain and from pounds 250,000 to pounds 1m at the Waterstone's book chain. Elsewhere in the group, the specialists division performed well. Virgin-Our Price increased profits by 10 per cent to pounds 11m and Waterstone's rose by 4.2 per cent to pounds 8.7m. Do It All, the DIY joint venture with Boots, reduced losses from pounds 10.6m to pounds 6.8m. The number of stores is being reduced to 145 and a refurbishment programme is under way. Commenting on whether WH Smith was now turning the corner, Mr Hardie said: "In the long term these measures will rebuild the brand but it will not happen overnight."
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