The dog days of August bring a good opportunity to ponder retail performance ahead of the peak trading period and WHSmith should do well.
Broker Numis has put together a list of how big retail names have fared by EBIT compound annual growth over almost a decade since just before the downturn hit, and it makes fascinating reading (See list below).
Homewares specialist Dunelm tops the table with a compound annual growth rate of 14.9%.
Testament, Numis notes, to “the attraction of a successful retail roll-out story”.
In second place, perhaps surprisingly, is bookseller and stationer WHSmith.
Its carpets may be the butt of humour on social media but compound annual growth of 8.6% is not to be sniffed at, especially compared with the comparable declines recorded by other big ‘legacy’ names such as Marks & Spencer or Home Retail – down 3.9% and 12% respectively.
Numis observes: “Management has done an excellent job managing product mix, margin and costs to drive sustained growth and the shares are up over 300% since mid-2007.”
While WHSmith’s in-store standards and the seemingly obligatory offer to customers of a supersize Toblerone draw condemnation from some industry observers, the retailer has shown itself to be a past master of store profitability management.
That is down to exhaustive space analysis so that the return on every metre drop is maximised.
While WHSmith’s high street estate can often look dowdy, and sales were down 4% in such stores when the retailer last updated in June, its travel shops are the dynamo of the business.
Revenues at the travel division were ahead 8% at that time, while like-for-likes advanced 4% helped by a bolstered food-to-go range.
WHSmith issues a pre-close trading update next Thursday (August 20). While retailers such as Tesco adapt their self-scanning machines to make them less ‘annoying’, such technology sometimes seems the only way to pay in WHSmith.
That, and the other aspects of WHSmith’s way of doing business that often frustrate observers, will no doubt continue to prompt derision.
But it has been said for years that WHSmith cannot continue to increase profits while sales frequently decline.
It has not happened yet. And next week’s update is likely to show WHSmith’s successful run continuing.
|Eight years to last reported FY||Compound annual growth|
|Marks & Spencer||-3.90%|
Source: Company & Numis Securities Research