Sales down, losses up, at 'weak' Waterstone's

<p>HMV has described Waterstone&#39;s latest set of financial results as &quot;weak&quot; as sales and profits fell in its half year figures. But it said the bookseller&#39;s new distribution centre was &quot;transforming&quot; the business, despite higher than expected running costs.</p><p>For the 26 weeks ending 24th October, sales fell by 4.3%, from &pound;235.1m to &pound;225m On a like-for-like basis, sales dropped 5.1%. Waterstone&#39;s operating loss also increased over the same period, from &pound;9.3m last year to &pound;12.9m this year.</p><p>Parent HMV said that while Waterstone&#39;s sales performance was broadly in line with that of the wider high street book market, its &quot;performance weakened as the period progressed&quot;. Supermarkets and online were blamed for offering the strongest competition.</p><p>It blamed Waterstone&#39;s higher losses on the decline in sales and a small dilution of its gross margin. Implementation costs at its book hub were &pound;0.9m over the period, &pound;0.6m better than the previous period. However, HMV said the hub&#39;s &quot;running costs have been greater than planned&quot;. The &pound;5m expected benefit of introducing the hub would not now come through until the 2010/11 financial year. HMV said this shortfall would be offset by other cost savings, temporary HMV stores and the acquisition of former Zavvi-stores. HMV added that &quot;significant focus is now being given to hub processes to deliver improved efficiency&quot;.</p><p>Despite these problems, HMV identified the hub as one of the period&#39;s highlights. It said: &quot;The hub is transforming the way that Waterstone&#39;s operates for the long term and, in addition to cost savings, we remain confident that it will improve business performance on several levels, including: enabling our booksellers to focus their skills and knowledge on customers; reducing returns to suppliers; and transforming our Internet business to enable us to more rapidly achieve scale.&quot;</p><p>It said sales of related product, including stationery and the Sony Reader, were up 19% year on year. Related product is less than 5% of Waterstone&#39;s total sales. It opened two stores, resited one and closed four during the period leaving it with a portfolio of 312 branches.</p><p>HMV said: &quot;The group continues to operate in challenging and highly competitive markets, particularly the book market, where Waterstone&#39;s performance remains weak, although the recent administration of Borders UK may benefit the Group in the medium and long term.&quot;</p><p>Waterstone&#39;s managing director Gerry Johnson declined to be interviewed for this piece. </p>