Beanie shortage hits WH Smith

WH Smith is considering a flotation of its Connect2U internet portal next year, even though the service was only launched last month.

Connect2U is a business-to-business trading portal that will enable Smith's 20,000 newsagent customers to arrange supplies direct over the internet. Smith's hopes to extend the service to other suppliers such as confectionery and soft drinks firms in return for commission. This will produce the revenue stream for the fledgling business.

Smith's owns 80 per cent of Connect2U with Axon, the software provider, controlling the remainder. Smith's is investing £5m in the project though chief executive Richard Handover was uncertain how much the business could be worth.

The comments came as Smith's revealed that falling music and video sales in the UK and a Beanie Baby shortage in the US had cast a cloud over its half-year results. A halt in the supply of the toys last year caused a £3m hit to profits with poor sales of CDs and videos reduced profits by a further £8m. Interim profits dipped from £105m to £101m after a £2m rise in e-commerce investment.

Mr Handover said Smith's was on track to achieve its stated aim of securing 30 per cent of the UK's on-line book market by 2002. Smith's estimates that its online sales of £4m, up 60 per cent on last year, give it a 15 per cent share.

In the core high street business underlying UK sales were up by 2 per cent and are up by 3 per cent in current trading. Smith's said book sales grew by 6 per cent against a market up 2-3 per cent.