Focus on margins pays off at WH Smith

TROUBLED books and magazines retailer WH Smith had some welcome good news for the retail sector today as it reported a 'substantial' improvement in profitability.

Although like-for-like sales were 1% lower in the six weeks to 15 January, and down 2% in the 20 weeks to that date, the group said its focus had been on margins, which improved by a better-than-expected 2%.

WH Smith shares were up 17¾p at 358p on the news.

The group said it had cut many unprofitable promotions - implying that this was in contrast to some other retailers, who tried to avert poor Christmas sales figures with promotions and discounts. Boots today reported sales up an impressive 2.6% over the Christmas period, with margins maintained despite widespread price-cuts.

However, WH Smith chief executive Kate Swann stressed: 'This is a long-term recovery programme and much remains to be done. However, we are on track and confident in the outcome for the year.'

Costs had been cut faster than expected and this helped the group recover from its battering by supermarkets and the internet in recent years. The scale of the challenge was underlined in October when it announced annual losses of £135m after an 'unacceptable' performance.

Better product availability, improved buying terms and an encouraging performance by stationery ranges also helped improve profits at the 673-strong chain of High Street stores.

Entertainment continued to be difficult as key DVD titles failed to meet market expectations. However, core stationery ranges saw strong like-for-like sales growth.