WH Smith seeks to ease costs after fall of pound

WH Smith said it will lose its protection against a weaker pound next year, and the company is looking to offset the impact by consolidating factories and negotiating better prices with suppliers.

WH Smith looks to curb costs
WH Smith looks to curb costs

The high street retailer is looking to curb an expected increase in costs associated with buying $30 million of stationery, after a hedge against the dollar expires next year, WH Smith’s chief executive Stephen Clarke said.

“Since June 24, we have been talking to our suppliers and factories, looking at how we can reduce cost that might come through by consolidation of factories or through other productivity initiatives,” Mr Clarke said on a conference call.

“We have made some really good progress there,” he said, adding that it was too early to say how much it would save.

Firms across Britain are having to mitigate the costs associated with the fall in the pound to near 31-year-lows once existing currency hedges expire, which could hit margins on imported goods. WH Smith also revealed that it had delivered its best annual sales for 14 years after it was boosted by surging demand for “food on the go” across its stores based in airports and train stations. The chain said it sold more than 10 million meal deals over the year to August 31, helping drive a 4 per cent rise in like-for-like sales in its travel arm. This offset a 2 per cent fall in comparable sales across the high street stores and left overall group sales up 3 per cent and 1 per cent on a like-for-like basis - its best growth since 2002.

WH Smith posted an 8 per cent rise in bottom-line pre-tax profits of £131 million for the year to August 31, up from £121 million a year earlier.

While sales fell in its high street stores, an ongoing tight control on costs helped drive a 5 per cent rise in trading profits across the division, to £62 million. It has also been boosted by the success of its new book club with YouTube star Zoella, which launched in June.

Analysts from Haitong Research said: “The results for the year to August 2016 are in line with consensus..with a confident forward looking statement and a delivery pattern consistent with recent times.”

WH Smith said it had not seen any rise in the number of tourists visiting its stores, despite forecasts that the pound’s fall could attract more overseas visitors.

“We have not seen any change in UK passenger numbers. Where we see an uptick of overseas passengers coming in, we will allocate our space accordingly,” Mr Clarke said.

Mr Clarke declined to comment on current trading, but said he expected good like-for-like sales growth in the travel business.