Variety retailer WHSmith has managed to reduce its costs even further then planned over its first half period, allowing it to yet again produce profit growth despite dwindling sales.
Results released today show that the business achieved group profits of £74 million in the six months ending February 29th 2012, a three per cent increase on the same period last year.
Trading has continued to decline for the retailer with like-for-like (LFL) sales dropping five per cent over the period, but with gross margin up by 130 basis points shareholders will remain more than satisfied with CEO Kate Swann’s performance.
First half profit growth was delivered solely by its travel stores, located at airports & train stations, with operating profit up eight per cent to £27 million. In comparison its high street operations saw its operating profit stagnate year-on-year at £47 million.
Swann commented: “We have delivered a good performance with profits increasing in the first half of the year.
“In travel we have grown operating profit by eight per cent and have made further good progress in our international channel with 80 units either open or agreed. Our high street business continues to deliver strong cash generation, with gross margin improvement and costs tightly controlled.”
Around £2 million of cost savings have been achieved in the company’s high street operations in the year to date, ahead of schedule, and as much as £3 million in further reductions are being targeted for the second half.
In the UK WHSmith opened 18 new travels store and internationally another ten units were unveiled, so that a total of 586 outlets now operate in this division, and more expansion is planned overseas with another 20 locations confirmed.
High street sales were down six per cent LFL in the half, and this division lost one net store during the period as three outlets opened and four were closed.
Sales dropped LFL across all product categories – stationery (two per cent), books (eight per cent), news & impulse (three per cent), and entertainment (47 per cent) - although the large declines in entertainment were primarily due to the reduction of presence in this product area.
Joesph Robinson, Senior Consultant at retail analyst group Conlumino, said: “All in all, Kate Swann continues to be successful in regard to her remit: cutting costs and steadily refocusing the business away from the high street towards travel locations.
“The business has delivered steady profit growth, and its strategy is one that the City has very much bought into. However, in the long term, the opportunities for cost savings will eventually run out and the business will needs serious investment, not least in its store portfolio.”