Bookseller and stationer WHSmith pleased analysts with improved margin despite a worse-than-expected sales decline during the peak period.

Managing director for high street Stephen Clarke said half-year profits would be in line with expectations.

Group like-for-likes dropped 5% in the 21 weeks to January 22, when total sales fell 4%.

However, gross margin improved by 160 basis points, which was ahead of the retailer’s expectations.

Seymour Pierce analyst Freddie George said the update was “reassuring”, despite sales being below what the market had anticipated.

Espirito Santo analyst Sanjay Vidyarthi said: “While sales are below expectations, hit by the weather, gross margin is now expected to be ahead of previous guidance meaning that the company remains comfortable with consensus expectations.”

WHSmith’s high street like-for-likes slumped 7% in the eight-week period and were down 6% in the 21-week period. Excluding the entertainment category, like-for-likes fell 3% in both periods.

The retailer said the performance reflected its strategy to rebalance the mix of its business away from entertainment and towards higher margin core categories. WHSmith said the sales fall reflected the “challenging operational environment in the pre-Christmas period”. Costs remain “tightly managed to reflect the trading conditions”.

At the retailer’s travel arm, like-for-likes fell 3% over the 21 weeks. It did not give a figure for the eight-week period. Total travel division sales were flat in the 21 weeks. WHSmith said although “passenger numbers were inevitably impacted by the weather” the division was outperforming.

Clarke said the retailer’s turnover-related rents in its travel division provided a “natural profit shield”.

Investec analyst David Jeary said: “With low average transaction values in both divisions, the group should be more defensive than many of its retail peers.”

Vidyarthi maintained: “As passenger numbers recover, we believe there is scope for travel to drive material earnings growth.”

Clarke said the retailer had minimised the impact of the VAT rise on its customers by “working hard with suppliers”.

The retailer has agreed a new five-year revolving credit facility of £70m, provided by Barclays Corporate, Lloyds Banking Group and Santander UK.

Read Retail Week Knowledge Bank’s in-depth WHSmith profile at


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