British heritage bookseller and stationer WH Smith’s (SMWH) like-for-like sales declined by 1% in the 20 weeks to 20 January with total sales flat, performance pegged back by the absence of any new big publishing trends this Christmas.
The news sends shares in the retailer 4.6% south to £20.34, though bulls will focus on the news the lucrative Travel business continues to grow at a very healthy clip.
TWO THIRDS FROM TRAVEL
Founded back in 1792, cash-generative retail stalwart WH Smith is insulating itself from the dwindling importance of the high street through its focus on the Travel division.
It is facing up to the challenge by opening up outlets in train stations, motorway service stations and airports where ‘captive’ customers will empty their pockets for low-ticket impulse purchases such as books, magazines, sweets and drinks.
Encouragingly, total sales in Travel grew 7% with like-for-like sales up 3%, reflecting good sales growth across all channels and with gross margins edging higher ‘driven by category mix management' - code for doing the retail basics right and stocking products that fly off the shelves with a good return on sales.
‘Our Travel business now accounts for almost two thirds of the Group's annual profit and we continue to deliver strong sales growth across all our key channels,’ enthuses CEO Stephen Clarke.
‘This was driven by ongoing investment in the business and continued growth in passenger numbers in our airport stores over the Christmas period. Our recently opened new concept store in Gatwick South has performed particularly well and is ahead of plan.’
The Travel arm’s International business now has 249 units open, including 2 of the 10 units won in Changi Airport, Singapore; Clarke expects all 10 units there to be open this spring.
Yet over in the traditional High Street business, total sales were down 5% with like-for-like sales down 4%, the latter metric in-line with expectations and all in all, a reasonable performance in the context of tough festive comparatives.
‘Our stationery and seasonal ranges, including cards and wrap, performed well with good sales growth versus last year,’ says Clarke, however ‘book sales were more challenging due to the decline in spoof humour titles and no new, big publishing trends.'
Christmas 2016 saw WH Smith benefit from the popularity of spoof humour titles, among them Five on Brexit Island, which carry high margins, while 2015 was the year of the craze for adult ‘colour therapy’ books.
While the High Street arm is structurally challenged in the age of online shopping, the resilient festive performance provides some relief following the recent profit warning from rival Card Factory (CARD).
Clarke also says ‘we continue with our cost efficiency programme’ for the High Street division ‘and now expect full year cost savings to be in the region of £12m, slightly ahead of target.'
