WH Smith has reported a 3% rise in group profit year-on-year for the six months to 29th February 2012, but said book sales were down 8% by volume like-for-like over the period.
The chain bookseller said that gross margin in its books category was up year-on-year by an undisclosed amount and its market share performance was “encouraging”.
According to Nielsen BookScan data, overall book sales for the comparative six month period stood at £886.7m – down 9% year on year. However, sales through its General Retail Market panel, which offers a strong measure of high street book shop performance as it contains data from Waterstones, WHS and general independent stores, were down 15% year on year, to £459.9m.
“The books market remains soft, however performance continues to vary by sub-category. Kids saw an improvement year-on-year whilst fiction and particularly non-fiction annualised strong publishing from the prior year,” the company’s trading statement said.
WH Smith did not divulge any details about its Kobo e-reader or e-book sales in its results posting, despite launching in partnership with the Japanese-owned company in October last year. However, the company did say it planned to boost its Kobo activity throughout the rest of 2012. “We continue to develop our presence in the e-books market through our partnership with Kobo and throughout the period have successfully built awareness of the brand and the product offer. Whilst it is still early days, initial performance is encouraging and we plan to further develop the offer throughout this year,” it said.
Overall, the WHS group made a pre-tax profit of £66m, up 3% from 2011, but group sales dropped to £665m from £686m the year before, with like-for-like sales down 5%. The travel arm of the business performed better than the high street, with sales growing by 2% to £217m, down 3% like-for-like on last year. High street sales by comparison sank 5% to £448m - down 6% on a like-for-like basis. Profit at the travel division increased by 8% to £27m while the high street arm generated £47m, in line with last year. High street achieved the profit by continuing with its strategy to focus on core categories and “rebalancing the mix away from entertainment, whilst focusing on optimising margins, tightly controlling costs and delivering the retailing basics.”
The high street division delivered £8m of cost savings during the period, £2m ahead of its cost-saving plan, through its “store energy plan” among other efficiency-saving techniques.
The number of outlets WHS has in travel continues to increase, with 18 new shops opened in the UK within the last six months and 10 opened internationally. The company announced it would open a further 20 shops abroad, with eight in India, bringing its total number to 80. The spread of new stores it will open in new countries is eight in India, two in Australia, two in Qatar, two in Gibraltar, two further units in Dubai, two units in Fiji and two units in Saudi Arabia.
WHS said: “We will continue to grow our international channel in a low risk and pragmatic way, utilising our different operating models: direct lease, franchise and joint-venture. Of the 80 units we have already won, 71% are franchise, 23% direct lease and the remainder are joint venture.”
Risks to the company over the second half of its financial year include economic, political and market risks, reliance on the WH Smith brand, key suppliers and supply chain management; store portfolio, business interruption, reliance on key personnel, treasury and financial risk, and pensions and investment risk.
Kate Swann, Group c.e.o for WHS said: "We have delivered a good performance with profits increasing in the first half of the year. Looking ahead, we expect the trading environment to be challenging, however we are a resilient business with a consistent record of both profit growth and cash generation and we have opportunities for growth in the UK and internationally."
The company also announced that Stephen Clarke, currently managing director of WHS high street division, will join the board of executive director from 1st June 2012.
Separately, Kobo has announced plans to open new branded shops within 100 WH Smith High Street retail locations in 2012. The company said this decision “follows the successful trial of the ‘Kobo Centre’ in some of WHSmith’s larger stores.” The e-reading company owned by Japanese firm Rakuten also announced it was slashing the cost of its devices from today, selling the Vox for £149.99. The Kobo Touch for £79.99 and the Kobo Wireless for £59.99.
Mike Serbinis, c.e.o of Kobo, said: “We value our partnership with WH Smith and are excited to have dedicated, knowledgeable staff members who will educate WHSmith customers and introduce them to the benefits of Kobo. We know that in partnership with WHSmith we will deliver an engaging in-store experience that will demonstrate our expertise, best-in-class design, easy user experience, and innovative product line.”
The move also means WHSmith stores will have a dedicated team of Kobo experts to advice customers about e-reading. “At each of the WHSmith stores, customers will find an experiential centre designed to help them discover the full line of Kobo e-reading devices and an even larger selection of the latest, stylish accessories and e-reader covers,” the company said.