Update on WH Smith
City Index June 11, 2014 10:27 PM
<p>Shares of WH Smith closed up 1.5% following the company’s latest market update today (11th June). For the 14 weeks from 2nd March through 7th […]</p>
Shares of WH Smith closed up 1.5% following the company’s latest market update today (11th June).
For the 14 weeks from 2nd March through 7th June, WH Smith reported flat total group sales, though like-for-like sales were down 2% from the same period the previous year.
By segment, the company’s travel division (WH Smith’s stores at airports and railway stations, among other venues) posted a 4% increase in total sales, with like-for-like sales coming in flat.
On the other hand, sales have continued to dwindle at WH Smith’s high street business, which reported a 4% decline in both total and like-for-like sales for the period.
Can WH Smith’s update be seen as positive?
WH Smith’s latest performance can’t exactly be described as impressive, but, the fact that the company’s total group sales were flat (albeit down on a like-for-like basis) certainly marks a change from the persistent declines that have plagued WH Smith.
That’s thanks mainly to its travel business, where progress in the company’s attempts to reverse that division’s fortunes is there to be seen.
Meanwhile, according to the stationery, books and newspapers retailer, its gross margins have continued to increase, thanks – in part – to the company’s cost-cutting efforts.
Indeed, in the face of a plunging top line, the company embarked on cost-saving measures in a bid to enhance profitability – and it’s been bearing fruit. In April for instance, WH Smith reported a 3% increase in pre-tax profit at £70m for the six months ended February, despite a 4% decline in both total and like-for-like group sales.
That trend has helped support the company’s shares, which are up some 48% over the last year – though down around 10% from a peak in April.
But long term, cost cutting alone can’t suffice.
Sure, WH Smith is trying to chase growth – that includes the company’s on-going initiatives to expand its international Travel business, and, those efforts should continue to bear fruit.
But challenges remain in its core high-street business (which represents some 60% of its overall revenue), and while the fall this time wasn’t as steep as we’ve seen in the past, it still has some way to go.
Still, for now, WH Smith’s consistent knack for boosting margins in the face of elusive sales growth should continue to sit well with investors.