WH Smith’s results are increasing evidence of a business suffering from the retail version of multiple personality disorder. On the one hand, its travel business is expanding and thriving. On the other, its high street stores are a dog-eared wasteland of stationery no one will ever write with and magazines no one will ever read (apart from MT of course).
Overall, its sales rose 1% in the 13 weeks to May 30. But the real devil is in the details. Smith’s airport and train station store revenues rose 8% year-on-year or 4% on a like-for-like basis, as it fleshed out its ‘food on the go’ offering (a category where everyone from Pret to Greggs is making hay). In contrast, its high street sales fell 4% on both measures.
That was apparently ‘in line with expectations and our profit focused strategy,’ the latter code for cost-cutting even the smallest-state Tories would baulk at. Hence why in the year to August 2014 profits rose 9% to £112m even as sales slipped 2% to £1.16bn.
As consumers turned to the internet to buy books and not buy magazines, WH Smith slashed the fat, and then some, but at the expense of bleeding high street sales. It wasn’t inevitable - after all Waterstones managed to move itself upmarket and turn the Amazonian tide. But it still baffles that it doesn’t just shut up shops.
Part of the reason is likely to be a clutch of long high street leases it can't rid itself of. The other clue is in the share price: up more than 4.5% to 1,608p this morning and over 100% in the last two years.
Credit: Yahoo Finance
But even though shareholders are starry-eyed over sandwiches, at some point there will be no more costs to cut. WH Smith can’t live a double life forever – especially with carpets like this.
Nope. Nothing wrong here. Everything's fine. 'Earmarked for new carpets.' pic.twitter.com/uDIntqCPGg— WHS_Carpet (@WHS_Carpet) October 10, 2013