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WH Smith sales drop 5% yet profits rise

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WH Smith will continue its international expansion after it posted a six per cent increase in annual pre-tax profits to £108m.

The retailer announced a profits boost across its high street and travel sections with four per cent and five per cent rises in profits respectively.

But like-for-like sales dipped by 5 per cent with high street total sales also down 7 per cent.

The results show the resilience of WH Smith on the high street and the chain says they plan to cut £22m over the next three years.

The variety retailer says it will continue to grow its travel section internationally including in China where it has won 30 kiosks and in the Middle-East, Australia and India.

Stephen Clarke, Group Chief Executive said the group ‘continued to deliver on our strategy with a strong performance and good profit growth in both businesses.’

He stated: “The Group remains highly cash generative enabling us to invest in our businesses and in new opportunities, whilst returning cash to shareholders.

“Looking to the year ahead, we continue to plan cautiously in an uncertain environment, however we are a resilient business and are well positioned for continued growth in both the UK and internationally.”

The company’s policy, initiated by former Chief Executive Kate Swann, keeps profit rolling in by increasing gross margins which can be achieved by strategies including robust buying and category mix management. The retailer also aims to save £22m in its high street stores over the next three years.

Neil Saunders, Managing Director of retail analyst firm Conlumino, said its financial management continues to be razor like but remained concerned of the company’s long term future.

“WH Smith sensibly focuses on maximising margins rather than simply driving up sales. On this front the company should be applauded for its adeptness and focus. In many ways this policy, which was initiated by Kate Swann, has probably saved the WH Smith from the fate of many of its high street contemporaries who been damagingly exposed to categories with ever shrinking margins,” he said.

“We believe that the longer term aim should be to drive up sales, especially by pushing higher ticket value items in areas like stationery and gifting; whether this is possible through a store estate that will struggle to support a higher priced more premium offering remains to be seen.”

Its book category continued to struggle with like-for like sales down 10 per cent but gross margin was up year-on-year.

Final dividend increased 15 per cent on last year to 21.3p per share.

Published on Thursday 10 October by Editorial Assistant

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