Profits up at W H Smith amid "soft" book market

Profits up at W H Smith amid "soft" book market

Like for like book sales at W H Smith have fallen by 3% in a "soft" market as the retailer reported a 3% increase in profits to £64m.

In its interim management statement, for the six months to 28th February, the group's sales dropped 4% to £686m, with like for like sales falling 5%.

Non-fiction sales increased and the business benefited from strong fiction and children’s books. The company said its gross margin for books was up year-on-year.

The financial report said: “The books market continues to be soft with performance varying by sub-category . . . We saw encouraging share performance versus the general retail market as we continue to implement our strategy to build our authority as a popular books specialist and took some strong shares in key Christmas releases, for example, Guinness World Records, The Family by Martina Cole and Jamie's 30 Minute Meals, and also post-Christmas, driven by the Richard and Judy Book Club."

The company’s travel sector gave a stronger performance than its high street stores, increasing operating profit by 9% to £25m, “driven by further improvement in gross margin and tight cost control.” However, sales were flat at £213m and down 3% on a like for like basis.

The high street stores delivered a “resilient” performance over the year, maintaining operating profit at £47m, the same as 2010. Total and like for like sales fell 6% to £473m. The company also continued to optimise margins and maintain tight cost control, achieving cost savings of £7m in the period, £1m ahead of plan on the high street.

A total of 19 units opened with W H Smith frontage in the period after the company acquired stores from the former British Books & Stationers firm for £1m in February 2011.

Kate Swann, group c.e.o said: "We have delivered a good performance across the group, despite a difficult consumer environment. During the first half we have returned £27m to shareholders through the share buyback and increased the interim dividend by 18%, demonstrating the board's confidence in the future prospects of the group and its continued cash generative nature.”

She added: "Looking forward, we expect the economic environment to remain challenging and we have planned accordingly."

Nick Bubb, analyst with Arden Partners, said the company’s increased interim dividend of 18% “is a useful reminder that W H Smith continues to grind out massive surplus cash flow".