WH Smith sales hit by margin drive
Likes-for-likes down as retailer focuses on high profit sales
January 29 2003
A tactical decision to focus on driving up margins hit like-for-like sales at WH Smith in the 20 weeks to January 18.
Like-for-like sales in the core UK store chain were down by 3 per cent across the period, countered by an increase in gross margin of 2 per cent. Like-for-like sales across the five week Christmas trading period to January 11 were down by 2 per cent.
The book, news and entertainment retailer said: “Over the Christmas period our focus was on improving margins and driving operational efficiencies. A deliberate decision was taken not to chase unprofitable sales. The sales performance reflects this tactical positioning. As a result of this focus, the gross margin increased by 2 percentage points, the supply chain experienced no operational issues, stock was carefully managed and operating costs were tightly controlled.”
Like-for-like sales in the travel retail business, which includes station and airport outlets, were up 4 per cent over the Christmas period and 3 per cent over the 20 weeks. WHSmith Online saw like-for-like sales increase by 43 per cent across Christmas, and 33 per cent across the full trading period.
Across the 20 weeks, like-for-like sales of books were down 3 per cent, stationery sales were flat with a gross margin increase of more than 4 points, entertainment sales were down 6 per cent and news sales flat.
The US travel retail business, which was hit by a slump in sales in the wake of the September 11 2001 attacks, saw like-for-like sales increase by 7 per cent in the 20 weeks to January 18. WH Smith said that trading in the US continues to be difficult, “with the ongoing weakness in the US economy suppressing recovery.”
Group Chief Executive Richard Handover said: “In UK Retail, our strong gross margin performance and operational efficiencies have partially offset the effect on profits of disappointing sales.
“We continued our focus on improving margins and efficiencies and did not chase unprofitable sales. This stance, coupled with heavily discounted offers from a number of key competitors in our markets, led to the overall like-for-like sales declines against strong comparatives.
“Looking ahead, we believe that we have now established a strong operational platform to enable a rollout of innovative and exciting products with a strengthened value proposition which will allow the business to regain sales momentum.
“In terms of the overall group performance, we are very pleased with the contributions from Publishing and News Distribution where there has been good progress. We are managing the business in anticipation of a continuing difficult and uncertain environment, but our balance sheet and cashflow are robust.”
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