Higher profit margin offsets weak sales for WH Smith

WH Smith - Manging Profits Despite Lower Sales

WH Smith – Manging Profits Despite Lower Sales

WH Smith managed to offset the effect of inclement weather on its sales for the quarter on better profit margins. The Newspaper, Stationery and books retailer said severe winter conditions caused its sales to drop by 7 percent, against the analyst’s projection of 5 percent.

The 219 year old group said in the eight weeks leading to January 22, it however managed to improve its gross profit margins ahead of its expectations.

Nick Bubb, an analyst at Arden partners termed the performance as “Resilient, reassuring and robust”, compared to other retailers who have blamed severe winter for lower sales and profits.

However, overall analysts are wary of the effects of a higher VAT that became effective at the beginning of the year coupled with Tuesday’s economic data showing the December quarter shrinking by 0.5%.

WH Smith said sales for 21 weeks till January 22 were down by 6 percent at its town centre stores. Sales were down by 3 percent at the group’s travel outlets during the same period.

In a statement issued today, the group said: “Overall performance for the period was in line with expectations … Looking ahead, we expect the trading environment to remain challenging and we have planned accordingly”.

WH Smith’s Market capitalization is around £704 million, as on Tuesday’s closing price. The company’s shared have underperformed the UK retail sector by about six percent in 2010.

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