WH Smith is to step further into the discount market after the books and stationery retailer enjoyed its best sales performance since 2002.
In the year to the end of August, sales at established stores were level with the previous year, arresting 13 years of decline.
Total group sales including new store openings rose 1% and pre-tax profits increased 8% to £123m in the year to the end of August.
The chief executive, Steve Clarke, said the company was benefiting from a “happy coincidence” of a better consumer environment, a rise in international travel and the craze for adult colouring books. The publication of Grey, the sequel to the hit Fifty Shades of Grey trilogy, and Harper Lee’s Go Set a Watchman also helped the chain.
Clarke said the biggest driver for non-fiction book sales had been adult colouring. The craze lifted both book sales and sales of pens as shoppers sought the right equipment.
The change in fortunes comes as WH Smith spreads its wings into new areas including overseas stores and the multichannel greetings card retailer, Funky Pigeon. A 4% rise in underlying sales at the group’s travel stores offset a 3% slide at high street outlets.
In its latest attempt to find growth, WH Smith is to open 10 more cut-price Cardmarket stores by Christmas – taking the total to 30. The retailer faces increasing competition from rival Card Factory, which is benefiting from the trend towards discounters across the high street, as well as from supermarkets and health and beauty stores.
“We have got some good Cardmarket stores and some not so good. We want to test our ability to pick 10 winners,” said Clarke. He said the company would wait until the spring before deciding whether to expand the chain further.
Cardmarket could boost performance in WH Smith’s high street division. Clarke insisted the high street stores had been “good for us”. He said profits continued to grow despite the sales fall as WH Smith cut £11m of costs and sold an increased amount of more profitable items including stationery, headphones and souvenirs.
As the company suffered continuing criticism from the @WHS Carpet twitter feed – where people post pictures of worn store flooring – Clarke said £1m had been spent on new flooring in the last year and that flooring in 300 stores had been replaced since he took over as chief executive two and a half years ago. He pledged that “a big chunk” of WH Smith’s £39m capital expenditure in the year ahead would go into maintaining stores.
A further £2m or £3m a year will be spent on funding the new “national living wage” for over-25s when it comes into force next year. Clarke said WH Smith would not be following other retailers’ lead and lifting wages earlier or extending the rise to the under-25s.
The retailer will open 20 non-high street stores in the year ahead – half in travel locations such as stations and airports, and half in hospitals. In September, WH Smith pledged to cut prices in its hospital stores after widespread criticism.
