WH Smith sees profits in line with forecasts

WH Smith said it expected full-year profits to be in line with expectations despite tough trading conditions on the high street in the second half of the year.

The UK books and stationery retailer, which last financial year reported one of its worst performance in its 202-year history, said during the second half of this year profits had improved as gross margins gained and it kept a tight control on costs.

The travel retail business ?continued to perform well? and news distribution was making ?steady progress?, it said in a pre-close trading update on Tuesday.

The retailer under the leadership of Kate Swann last year embarked on a three to five-year turnround plan that aims to return WH Smith to its former position by cutting costs and improving margins. The retailer said on Tuesday that plan remained ?on track?.

Ms Swann has also moved the retailer out of some entertainment products such as CD singles and videos to focus on higher margin sales of books, stationery and cards.

In April the retailer delivered a sharp rise in first-half profits, prompting analysts to raise full-year forecasts from a consensus of ?69m ($124m) to about ?72m.

Rhys Williams at Seymour Pierce said that considering the difficult conditions, the retailer had done well to maintain the recovery. ?However, this recovery is being produced through cost savings boosting margins, not higher sales. Top line growth remains a concern for the business, and at some stage this will have to be addressed, since savings cannot continue for ever.?

Preliminary results for the year to August 31 will be released on October 13.

In late morning trade the shares were up 2?p at 374?p.

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web.