In the 21 weeks to 21st January, total sales at WHSmith were down 3% with a decline in LFL sales of 5%. The high street division saw total sales decline by 5% in total and by 6% on a LFL basis. Neil Saunders, Managing Director of Conlumino, comments:

“Like-for-like sales have fallen over every Christmas period since 2005, so a further dip in trading comes as little surprise this year. Fortunately, WHSmith has been skilled in managing costs and has, over a number of years, managed to increase profits against a declining top line.

“While this business model is rational over a short to medium period, longer term it is unsustainable. Eventually cost savings will run out and WHSmith will need to look to grow profits through increasing sales. When the time comes such a strategy will be challenging as the business needs serious investment to bring neglected assets up to scratch; nowhere is this more evident than in the store estate.

“Ventures like the Kobo and Funky Pigeon are interesting, but in the scheme of things they remain distractions and not without challenges of their own. The former is up against extremely tough competition from Amazon’s more compelling device. The latter is a tacit admission that WHSmith’s own stores are incapable of hosting a more aspirational offer and has limits to growth as the market is already crowded with expanding players such as Paperchase.”

“Overall, we maintain our view that WHSmith is a business being run more as a cash machine than being built as a viable long term prospect.”

This release is published by Conlumino – 25th January 2012