Financial and Business|

WH Smith Sales Fall 4%

WH Smith Store w Costa CoffeeWH Smith, the British-based retailer of stationery, books and newspapers, has reported that its strategy to cut costs and improve gross margins instead of driving top-line sales has been paying off in such a difficult market that is unlikely to improve in the near future. The group said on Thursday that the economic environment is still uncertain, and while they are remaining cautious about customer spending, they are still confident in the outcome for this financial year.

WH Smith trades from over 530 outlets at train stations, airports, motorway service stations, work places and hospitals, as well as more than 580 stores on the high street. Sales at the group’s stores that have been open for more than a year dropped 4% during the 18 weeks up to July 2, which is better than the 5% fall during the first half of its financial year, ended February 28. High street like-for-like sales were also down 4%, while its travel division saw a 2% decline in sales – down from 6% for the high street and 3% for the travel division during the first half. Including new store openings, sales are down 1%. However, WH Smith says that gross profit margins have continued growing, which has been boosted by cost savings.

Chief executive Kate Swann has improved gross margins and cut costs by focusing on the company’s more profitable products, taking more control over markdowns and using better sourcing. The group’s mix of products have been rebalanced toward core categories rather than on entertainment products – eg. computer games, consoles, CDs and DVDs. This has made the group less affected by consumers cutting back on their spending, with its high street business having an average £5.5 transaction value and its travel outlets having £3.5.

Consumers in Britain are trying to cope with rising prices, a lack of credit, subdued wages growth, a flat housing market, job insecurity, fears of rises to the interest rate and austerity measures being carried out by the government. Because of this, some retailers have failed to keep their doors open. However, WH Smith has been expanding overseas and is planning to open another 7 units this year to take its total to 47.

In another matter entirely, WH Smith has declined to comment on its position relating to the phone hacking scandal at News of the World, the nation’s leading Sunday newspaper. The tabloid has been accused of hacking the phones of war victims, murder victims, terrorist victims, as well as all their families. This has prompted a backlash from the public, politicians and now even businesses. Many firms across several markets have announced that they will pull their advertisements from the newspaper – some because of the revulsion their customers have expressed. However, WH Smith hasn’t commented on its stance.

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