Reasons to be smug at WH Smith

02 December 2008

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The fortunes of two of our most familiar retailers could not be more different, says Judi Bevan. While Woolworths has gone into administration, WH Smith marches ever forward

Swann cut costs across the board and improved the efficiency of the main Swindon warehouse, although publishers complain that the buyers still massively over-order and half the books they took come back several months later. Having banished music and entertainment, she then sold off a number of businesses, including the overseas retail business and the publishing house Hodder Headline.

By 2005 the debt had been reduced and Swann turned her attention to building the business through the travel arm, winning new airport contracts and moving strongly into motorway service stations. Earlier this year, the company was in the enviable position of being able to return £90 million to shareholders. It continued to grow outside the high street, buying hospital retail group UNS and another 23 units in 11 airports.

The result is that last year, not only did profits before tax to August soar by 15 per cent to £76 million, but the analysts that follow the company are confident of further growth in 2009. The retail team at Citi have made it their ‘top pick’ of the general retail mid-caps and their confidence was borne out last month when the group announced a 4 per cent rise in total group sales in the first ten weeks.

Poor old Woolies, however, had few friends. Analysts predicted record losses of at least £20 million. Johnson’s credentials are reasonable and it is to be hoped that the banks and suppliers give him a chance to build up the remaining EUK and 2entertain into a profitable business.

The problem for anyone taking on the stores is that Woolworths lacks some of Smith’s natural advantages, but they could do a lot worse than to take a few leaves out of Swann’s book and concentrate on the bottom, rather than the top line. Swann has reason to be smug this Christmas, but from what colleagues say about her, that is unlikely.