High street retailer WHSmith has achieved a fall in costs and rise in profits during the last six months despite a “difficult consumer environment”, it announced today.
Its first-half trading period ending February 28th 2011 showed group profit from trading operations up three per cent year-on-year to £72 million, whilst group total sales fell five per cent on a like-for-like (LFL) basis.
High street stores saw the biggest decline in trade compared to the same period last year, down six per cent, but with gross margins improving 170 basis points year-on-year the retailer finished the half with £70 million in net cash.
Kate Swann, Group CEO of WHSmith, said: “We have delivered a good performance across the group, despite a difficult consumer environment.
“In Travel we have grown profit by nine per cent, demonstrating the strength of the business model.
“We are encouraged by the performance of our international units and now have a total of 40 units either opened or planned. Our High Street business continues to be highly profitable and cash generative.”
Total travel store sales were flat compared to H1 last year but decreased three per cent LFL, whilst gross margins for the segment improved by 150 base points through buying improvements and category mix management.
During the first six months of the year 11 new travels stores opened, in airport, rail, hospital and workplace locations, and in the second half a further 22 units are planned.
Stores on the high street continued to be the poorest performing and cost savings for the period in this segment were £1 million ahead of estimates at £7 million, while eight new stores were opened and a further 22 were acquired from British Bookshops.
A reduction of the entertainment category to just five per cent of the business saw its sales drop 53 per cent LFL, news and impulse products fell four per cent, books declined three per cent and sales of stationary goods were down just two per cent year-on-year.
WHSmith trades in a number of increasingly weak markets - the high street, print publications, variety stores - and yet Swann seems confident that prudent financial management will see them through the tough times and set them up well for when spending begins to rise.
“During the first half we have returned £27 million to shareholders through the share buyback and increased the interim dividend by 18 per cent, demonstrating the board’s confidence in the future prospects of the group and its continued cash generative nature,” Swann added.
“Looking forward, we expect the economic environment to remain challenging and we have planned accordingly.”