Credit: Maxime De Ruyck/Flickr

Adult colouring books boost WHSmith's profit forecast

'Colour therapy' has been drawing in customers, but the long-term fate of the dilapidated stores is uncertain.

by Rebecca Smith
Last Updated: 20 Jan 2016

WHSmith has just raised its profit forecast for the year – good news for shareholders (shares were up 8% to £17.19 by mid-morning), but bad news for customers as the retailer confirmed it would continue its tried and tested cost-cutting approach with renewed vigour.

High street sales were sluggish, declining 1% year-on-year, while overall sales rose 4% and 2% on a like-for-like basis. Once more, the retailer was reliant on its travel arm to pick up the heavy lifting – like-for-like sales climbed 5% in the 20 weeks to January 16 and overall travel sales grew 12%.

The firm said the glimmer of life among the high-street stores could be traced back to the current fad for adult colouring books or ‘colour therapy’. But that’s unlikely to be a long-term route to rejuvenating its tired shops - not least because WHSmith is no longer the go-to destination for books anyway, what with the rise of that pesky internet thing.

Amazon’s best seller list last month featured several colouring books – The Harry Potter Colouring Book, Enchanted Forest: An Inky Quest And Colouring Book and Animal Kingdom – and in a battle against the e-commerce giant, not many come out on top.

A strong five-week Christmas period from the high street led WHSmith to forecast profits being ‘slightly ahead of plan’, and reinventing product lines may help, but considering the stationer’s unerring focus on costs, you have to wonder how much longer it can keep that up. Surely, there's only so much fat that can be trimmed.

The retailer has warned that the National Living Wage - a minimum wage of £7.20 for over 25s, due to come in force from April - will cost it £1m in the 2015/16 financial year and two-thirds of that cost will come from its high-street arm. So it’s unlikely to splash out on sprucing up those tattered carpets anytime soon. The focus has been on continuing to expand its higher margin travel business.

‘Profitable growth and cash generation will remain central to our plans allowing us to invest in new opportunities for the future,’ CEO Stephen Clarke said.

You’d think there’d be building anticipation for the tide to turn – how much further can the cost-cutting go? But the tradition of paying a fair whack to its execs suggests confidence hasn’t stuttered yet. Clarke collected just under £4m for 2015 and CFO and COO Robert Moorhead was rewarded with £3.5m.

In fairness, Clarke has brought a halt to 13 years of slowing sales at the company – last year it posted flat sales for the year to August. Which is all well and good, but for some MTers at least the firm’s brand remains as shabby as its carpet.

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