WHSmith has reported rising profits but flat like-for-likes in its full year as it estimates the living wage will cost it £2m to £3m a year.

  • Living wage to cost retailer £2m to £3m annually, largely affecting high street stores
  • Pre-tax profit up 8%
  • Sales up in travel arm but down in high street stores

Headline group pre-tax profit rose 8% to £123m in the year to July 25.

WHSmith said it expects the introduction of the living wage to cost it about £2m to £3m annually, representing 0.5% of its total cost base for the year and largely impacting its high street business.

The retailer said: “As with all inflationary pressures, we will look to offset these increases through our existing pipeline of initiatives as well as identifying further opportunities for improved productivity and efficiency.”

Retailers including Next have said they would pass the living wage cost onto shoppers while others have said they will absorb it.

Group sales

WHSmith group total sales increased 1% to £1.18bn and like-for-likes were flat.

Total travel sales increased 9% and like-for-likes advanced 4%. Trading profit increased 10% to £80m, including £5m from its overseas business. WHSmith operates 736 units in its travel arm.

Like-for-likes in air rose 6%; in rail 3%; and in hospitals, where it has been lambasted for having higher prices, up 6%. 

In its high street arm total sales were down 4% and like-for-likes fell 3%. Trading profit across the 615 high street shops was up 2% to £59m.

WSmith operates 163 overseas stores, where total sales increased 33% to £57m and like-for-likes rose 4%. The retailer is in 20 countries and 28 airports outside of the UK. “However, our share of the news, books and convenience travel market is still very small. We continue to see opportunities to grow using our three operating models of directly-run, joint venture and franchise,” WHSmith said.

WHSmith group chief executive Stephen Clarke said: “Our Travel business continues to perform well with strong sales across all channels in the UK, reflecting our ongoing investment and growth in passenger numbers.  Internationally, we have made good progress in growing our sales and profit. 

“Looking ahead, our focus will remain on profitable growth, cash generation, investing in new opportunities and evolving our customer proposition, all to ensure we are well positioned for the future.”