WH Smith has reported a 1% fall in total sales and a 3% fall in like-for-like sales in the 15 weeks to 9 June 2012. Analysts say it continues to benefit from its skill in cost-cutting, but in the longer term investment will be needed.

WH Smith continues to benefit from its skill in managing costs, refocusing its product mix towards higher margin categories, and taking advantage of the opportunities in travel. In relation to its strategically important travel stores, these will have received a slight boost from the Jubilee and the ensuing rise in consumers using travel locations during the extended weekend.

“All in all though, it’s very much the same old story. The business looks ideally placed to deliver continued steady profit growth in the short term – having previously identified a further £3m worth of cost savings in its high street operations for the second half. However, in the longer term, opportunities for cost savings will eventually plateau and the business will require serious investment, not least in its store portfolio.” Joseph Robinson, Senior Consultant at Conlumino

“The shares have fallen around 15% since the end of March, which is overdone in our view given the more defensive small-ticket nature of the business, with average transaction values around £5, and the group’s consistent delivery of gross margin and profit expansion. We remain buyers of the shares for the strong cash flows, supporting both share buy backs and an FY12E dividend yield of 5.5%, and the growth potential within Travel, now the key profit driver within the group.” David Jeary, Investec

“You can be sure that WH Smith will deliver good profit, earnings and dividend growth despite weak LFL sales. Its déjà vu all over again at WH Smith today, because you just know that the IMS will say, yes, sales down, margins up and profits on track. In fact, we suspect that the statement is, word for word, exactly the same as this time last year: ‘Whilst we continue to be cautious about consumer spending, we remain confident in the outcome for the full year’. Under-promise and over-deliver?” Nick Bubb, retail analyst