Waterstone’s managing director Gerry Johnson has attempted to pacify the City by breaking his silence over problems at the bookseller’s centralised distribution centre, as analysts remain divided on the impact it will have on the business.
Johnson denied there is a backlog at the Book Hub, which opened in August, and said the centre has overcome its initial teething problems and is performing well, although Waterstone’s has admitted to relying more heavily on third-party wholesaler Gardners.
A source close to Waterstone’s owner HMV Group said a strong performance on Super Thursday – a bumper release day for the book trade that fell on October 1 – proves the centre will be able to handle the busy Christmas period. The source said: “The Book Hub fulfilled 2 million books – the volume needed to fulfil over the peak Christmas trading period – successfully.”
Analyst Seymour Pierce said it viewed the problems at the retailer as “relatively short term” and has forecast that profits will bounce back from £8m in 2009/10 to £18m in 2010/11.
It added: “The improvement will arise from the company not having double running costs, better terms being obtained from the publishers and lower return rates.”
However, Altium Securities analyst David Stoddart said any reliance on third-party wholesalers could “clearly impact profitability during the most important trading period in the year”.
He added: “The long-term implications would be worse if the problem drives customers to rivals during the peak season.”