3rd Jun 2015 11:15
LONDON (Alliance News) - WH Smith PLC Wednesday reported a rise in total sales in the third quarter of its financial year, although it said that like-for-like revenue was flat, and it said its strategy to improve profitability of its struggling High Street business is working.
The books and stationery retailer said that total group sales in the 13 weeks to May 30 were up 1% compared to the same period the year before, but like-for-like revenue remained flat year-on-year.
The Travel business performed well, with total sales growth of 8% and like-for-like sales up 4%. The 'Food to Go' range continues to be well-received by customers following its roll-out last summer, WH Smith said, adding that its gross margin also improved in this area of the business.
However, the struggling High Street business suffered a 4% decrease in total sales, with like-for-like sales also down 4%, although the retailer said that gross margin improvement and cost savings have been delivered in line with plan.
WH Smith's High Street division suffered a 5% sales decline in the first half of its financial year, as reported back in April, however it did benefit from a 180 basis points improvement in gross margin, which contributed to a rise in High Street trading profit to GBP50 million from GBP49 million in the half year.
On Wednesday, WH Smith said its High Street sales decline was in line with its expectations and with its profit-focused strategy of creating value through gross margin improvements and cost efficiencies.
"We will continue to focus on profitable growth and cash generation while investing in new opportunities in both Travel and High Street that position us well for the future. We remain confident in the outcome for the full year," WH Smith said in a statement.
Investec analyst Kate Calvert said that the retailer's trading statement represents "another reassuringly in-line third-quarter performance from WH Smith with good momentum in its travel business ahead of the important summer trading period", and remains upbeat about the poor High Street performance saying that the division has already traded through the important Christmas period.
Cantor analyst Freddie George, however, needs to be convinced that any slowdown in the growth in gross margin gains seen over the last decade can be offset by the developments of the company's international Travel business.
"The stock, which has risen by 16% over the last quarter and is now rated at a premium to the sector, has benefited from the ongoing share buyback programme," says George. It is now rated at 18.7 times its 2015 financial year earnings and has a prospective dividend yield of 2.5%, he said.
Shares in WH Smith were trading up 4.6% at 1,609.00 pence midday Wednesday.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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