Waterstones’ boss has insisted the bookseller will not “chase share” at the expense of margins as it reported widening losses at the business in the year to April 28, 2012.
Waterstones managing director James Daunt, who was parachuted into the position in 2011 when Russian investor Alexander Mamut acquired the chain from HMV, told Retail Week: “We’re not chasing market share but we’re managing ourselves in a dramatically more efficient way.”
Pre-tax losses widened from £28.7m to £37.3m in the year to April 28, 2012. Turnover slid 14% to £410.4m. Like-for-likes tumbled 11.1%. However, Daunt expects the business to return to profit at an EBITDA level in the current year. Last year it made an EBITDA loss of £7m.
He added that since year end the performance had “strengthened throughout the year, culminating in a pretty strong Christmas”, when like-for-likes were up 5%. Daunt added: “We have managed top-line growth in a disciplined way. We’ve been managing margin.”
Daunt said the trading period 2011/12 reflected the “shocking state” the business was in when he took the helm. The retailer was sold two months into the period, in June 2011. “We inherited a business that was in a shocking state. It’s a horrendous set of figures reflecting the horrendous position Waterstones was in a year ago,” said Daunt.
He said it would take two years before Waterstones would be back on track. “It will be a very different sort of retailer to what Waterstones has hitherto been,” he said.
Waterstones has taken “huge strides” in finding efficiencies in the business, said Daunt. He highlighted that the bookseller had reduced its return rates to 10%. Daunt said historically Waterstones had a returns rate of 20% to 25% for the past “20-odd years”.
He added that there were no plans to overhaul the digital operation to better compete with Amazon. “In two years I doubt we’ll have a substantially bigger online offer; we have a competitor who already does that very well.
“I want a business that generates cash, it’s got to be sustainable.”
Waterstones struck a deal with Amazon last year to sell the etailer’s Kindle ereader in its stores. Daunt said: “We’re selling a lot of them, it makes sense to our customers. It’s a very small part of our business, it’s not material in financial terms. But it’s important to give our customers what they want.”
Daunt said instead he wanted to “have more book shops and much nicer book shops”. The retailer operates from about 280 shops at present and is revamping the estate. Daunt said while he wanted to open new stores, others would be shuttered.
Waterstones opened Café W’s in six stores last year and plans to open “an awful lot more” across the estate.
Daunt said the initiative is having a positive effect on sales. “In the top-performing shops there’s been a clear correlation. We’re selling more books [in those stores with cafes]. I’m quite sure we will have an awful lot more.”