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Profit up at Waterstone's despite sales dip
30.06.11 | Lisa Campbell
Waterstone’s increased profit by £6.7m last year as like-for-like sales fell by 3.8%, according to financial results released today.
The HMV Group announced in its financial report that in the 52 weeks to 30th April 2011, Waterstone’s profit grew from £2.8m to £9.5m. During that time however, total sales for the high street bookseller dropped by £14.4m to £499.2m and like-for-like sales fell by 3.8%. In the same time period, sales at the HMV Group as a whole dropped from £2.02bn to £1.87bn and like-for-like sales plummeted by 11%. After tax and the disposal costs, HMV Group made a loss of £121.7m, an improvement on the £152.8m loss last year.
The results come after the completion of the sale of Waterstone’s to Russian billionaire Alexander Mamut’s A&NN Group was finalised yesterday (29th June) and James Daunt, owner of Daunt's independent chain in London, began his tenure as m.d.
Regarding Waterstone’s, the HMV Group said: “Satisfactory first half and Christmas trading periods were followed by a disappointing final quarter of the year, with weakness in the book market accompanying some loss of market share. However, despite the disappointing end to the year, Waterstone's has focused throughout on transforming its offer, through an enhancement of range, successful utilisation of the book hub, investment in refitting the top 20 stores, and an enhanced e-reader offer. This has resulted in pro forma operating profit of £9.5m, compared with £2.8m last year.”
It added Waterstone's “enhanced local offer and more selective discounting” meant gross margin improved 70 basis points in the year and “strong cost management” meant operating costs shrunk 4% during the same period.
HMV Canada was recently sold to re-structuring firm Hilco UK for £2m and the Group revealed that reclassifying that operation and Waterstone’s as “disposal groups” resulted in a non-cash impairment charge of £111.5m. Within the financial year, 19 Waterstone’s stores closed, 15 of these shutting in the final quarter.
The HMV Group revealed the cost of closing the stores totalled £8.3m with head office restructuring costs worth £0.5m. Total operating exceptional costs totalled £10.2m.
It said its online music store 7 Digital and e-book business anobii contributed a £1.0m loss to HMV Group.
Philip Rowley, chairman of the HMV Group, said: “The separation of HMV and Waterstone's, and the sale of HMV Canada, are the right decisions at this time. The sale of Waterstone's, in particular, has enabled the Group to agree with its banks a revised, two-year £220m credit facility which strengthens the capital structure of the Group and enables us to continue evolving our strategy to deliver value from the HMV UK and Live businesses.
“In turn, new ownership for Waterstone's and HMV Canada has secured a future for these businesses in increasingly challenging markets. On behalf of the board, I would like to convey my appreciation to the teams at Waterstone's and HMV Canada for their contributions to our group.”