WHSmith has cultivated a reputation for being able to cut costs to the bone, but it seems the frugality stops when it comes to the boardroom. Its carpets may be threadbare but the man in the top chair has bagged himself a 56% pay rise.
Chief exec Stephen Clarke will be paid just shy of £4m for 2015, a year where the chain’s like-for-like sales remained flat and it came under increased fire for its high-priced hospital shops, failing to pass on VAT savings to airport customers and continuing to neglect its weary stores.
Though Clarke’s base salary crept up by just 1% and his bonus climbed around 8.8%, his total remuneration soared because of a massive jump in the value of his long-term incentive plan to £2.6m. CFO and COO Robert Moorhead also took home a pretty tidy £3.5m.
To be fair, the company’s financial performance hasn’t been half bad. It’s not surprising shareholders are willing to tolerate such big pay increases when the chain’s profits and earnings per share have continued to grow and its share price has soared 78% in the past two years.
But there are challenges ahead. Group sales were up 1% this year but the long-term trend is one of declining sales – particularly in its high street division, where sales were down 4%, and 3% on a like-for-like basis, in the year.
Its ‘travel’ division, made up of stores in hospitals, train stations and airports, is faring better, but its estate of 615 high street stores could prove to be a heavy weight around its neck as revenues fall further. That decline will surely continue if it can't inject some life back into its stores.
As its annual report notes, ‘The WHSmith brand is an important asset and failure to protect it from unfavourable publicity could materially damage its standing and the wider reputation of the business thereby adversely effecting revenues.’ You don’t say.