‘To sell more stuff!’ may be the mantra of the new marketing team at WH Smith, but the troubled retailer has yet to show any evidence that it is doing so in UK stores. The newsagent, bookseller and stationery retailer is expected to unveil heavy losses of &£100m after exceptional items when it unveils its full-year figures on Thursday. Profits of between &£64m and &£70m are expected before tax, exceptionals and goodwill, down from &£102m last year. But it will be the underlying performance of the UK retail business that the City will be scrutinising closely.
New chief executive Kate Swann, brought in from hard-nosed retailer Argos last November, will no doubt argue that the full impact of her changes to the business has yet to filter through to the bottom line.
WH Smith is, on the face of it, an out-of-date retail proposition – if it didn’t exist, you wouldn’t invent it. It is being squeezed by the supermarkets on the one side and by the specialists such as HMV on the other. Yet Swann and her marketing team believe there is a market opportunity for WH Smith in offering ‘more of what you really want (and less of what you don’t)’.
The acid test will come all too soon – at Christmas, a period that produced disastrous results for the retailer last year. The marketing team has rejected the ‘polite’ advertising of the past in favour of work that is designed to ‘sell more stuff’ and is focused around product and price. Whether the bookworm character and his team of friends, coupled with a new media strategy that includes mono print ads in newspapers and flyers distributed to people’s homes – a communications route championed by Safeway and then picked up by all and sundry, including Boots and Sainsbury’s – will work remains to be seen.
It could be Swann’s final song before the venture capitalists – put off earlier this year by a huge pension deficit that has since been attended to – get a free run at the business.
They are also waiting to pounce on J Sainsbury, which on Tuesday was forced to issue its third profits warning since March, putting underlying interim pre-tax profits for the half ending October 9 at between &£125m and &£135m, considerably lower than most analysts’ forecasts of &£170m to &£185m, and less than half the &£366m it posted the same time last year. Chief executive Justin King, who is also basing his recovery strategy around driving sales by offering better value to customers, is set to give an update on October 19.
Following hot on the heels of King will be Marks & Spencer chief executive Stuart Rose, who is due to brief the City on November 9. He may shed more light on his review of the various sub-brands in the retailer’s stable. He will also be banking on Christmas to help boost M&S’s UK retail sales for clothing, food and home, which according to yesterday’s trading statement were down 5.5 per cent on a like-for-like basis for the 12 weeks to October 2. A poor Christmas could also find Rose fighting off bids from predators in the New Year.
With so much at stake for Swann, King and Rose the countdown to Christmas will be a nail-biting few months and the three may find that their days are truly numbered.
Amanda Wilkinson, Deputy Editor