WH Smith recovers to pounds 38.6m profit despite weak sales growth

WH Smith signalled the start of a long-awaited recovery yesterday with a sharp increase in profits though sales growth is still among the weakest on the high street.

Announcing half-year profits of pounds 38.6m compared with pounds 17.3m last year, the chief executive, Bill Cockburn, restated that turning around WH Smith would be a four-year job but stressed that the company was moving in the right direction.

"The group has been focused on its core activities, management has been strengthened and efficiency has been improved," he said. "But until we can demonstrate that we can grow the business I think there will still be a reservation about our progress." He admitted that first-half sales growth was "not that good".

As part of the campaign to revitalise the core WH Smith chain, the group is testing a new blue logo on its shop fronts. The signage is on trial at a handful of stores and features an exclamation mark at the end of the name though this may be jettisoned. If successful, the new look will be rolled out to all stores and will signal the end of Smith's orange and brown identity.

Sales at the core WH Smith chain grew by just 1.5 per cent in the seven months to 30 November and at the same rate over Christmas. The number of product lines has been cut by 30 per cent and the number of suppliers reduced. This space will be used to develop more Discovery zones for children. These areas, which group together books, games and multimedia products, have been tested in larger branches and will be added across the chain over the next two years. Music will be added to a further 90 stores.

Mr Cockburn said WH Smith still had to improve stock availability, store layouts and the company culture to one that encouraged more innovation.

Group like-for-like sales grew by 2 per cent in the period. Of the remaining chains, Waterstones was the star performer with like-for-like sales 9 per cent higher and profits 23 per cent ahead at pounds 9.1m.

But Virgin Our Price performed poorly with sales 2 per cent lower. The group slid into a pounds 1.4m loss in the first half compared with a pounds 2.9m profit last time. Mr Cockburn blamed a poor roster of new album and video releases in 1996.

Of WH Smith's US businesses, its music chain, The Wall, increased losses to pounds 3.4m.

Group sales in the six months to 30 November were marginally lower at pounds 1.29bn due to disposals. The half-year dividend was maintained at 5.25p. The shares closed 4.5p higher at 434.5p.

Investment column, page 20