WH Smith has reported a 9% rise in pre-tax profits for the year but said books sales continue to be “challenging”.
The chain retailer reported its annual results for the year to 31st August 2014 today (16th October), with pre-tax profits revealed to have risen by 9% year-on-year to £112m.
The company’s travel stores were the highest performing of the two business arms, achieving a “record year” for profit, which was up 11% to £75m. Meanwhile the High Street stores also increased profit by 4% to £58m. This demonstrates “the continued success of our profit focused strategy,” the group’s c.e.o Stephen Clarke said.
The retailer has followed its usual trend of achieving a rise in profit despite falling sales. Overall, the group’s total sales fell 2% to £1,161m and were down 3% on a like-for-like basis. In Travel, total sales were up 4% while like-for-like sales were flat and High Street sales were down 6% while like-for-like sales were down 5%.
Stripping cost from the High Street business has helped the company achieve profit on the back of falling sales. In the last year, £14m of cost savings were found in that business arm, while an additional £11m of costs savings will be made next year, WH Smith said.
While the retailer did not give a sales figure for books, it said the sector “continues to be challenging” and varies by category, with “the quality of publishing still the biggest driver of market performance.”
Children’s book sales have proved more resilient than adult titles for the retailer, which revealed that 75% of the company’s book sales came from non-fiction and children’s combined, whereas fiction sales had taken a bigger hit. It named the Minecraft series as performing particularly well for the business. Going forward, it intends to “to focus on areas of market growth, build on areas of relative strength and drive the overall net profitability of the category,” the company said.
Meanwhile, it revealed it has extended its contract with Kobo until 2018.
“While the e-books market continues to see growth, it is evolving as we had expected with rates of growth and value penetration slowing," WHS said. "E-books remain a relatively small proportion of the consumer books market with the biggest penetration in fiction. Over 75% of our book sales are non-fiction and kids, reflecting our core book customers who are lighter, less affluent book buyers.” It added: “According to publishers the rate of growth and penetration of e-books has slowed with value penetration estimated to be around 15% - 18%, with growth closer to 20% than the 100% we have seen in recent years. Our partnership with Kobo continues to develop with the Kobo shops performing well. As a result, we have extended our contract with Kobo to 2018.”
WH Smith said that as the focus of e-reading moved towards multi-function tablets through apps, “our plans with Kobo reflect this,” as reported by The Bookseller at Frankfurt Book Fair last week.
The company also revealed it had opened 30 new international travel units last year, bringing its overall number to 165 travel units abroad.
Meanwhile, a new share buyback deal of up to £50m was also announced, after completed the £50m share buyback announced in October 2013.