WH Smith in dividend hike on profit rise

WH Smith yesterday forecast another rise in profits this year, saying the low average spend of its shoppers protected it from government austerity measures.

The retailer, which trades from 573 high street stores and a 516-outlet travel division with units at airports, train stations, hospitals, motorway service stations and workplaces, was relaxed about the impact on its business of next week’s public sector spending review.

“Relative to other retailers our average transaction value is pretty low at around £5 so we are less affected during a downturn or tougher economic times,” chief executive Kate Swann said.

Swann was speaking after WH Smith beat forecasts with a nine per cent rise in 2009-10 profit, lifted its final dividend by 18 per cent and said it would return up to another £50m to shareholders through a buyback programme.

Prior to the update, shares in WH Smith had increased by 10.4 per cent over the last three months,

WH Smith made a year to August 31 underlying pre-tax profit of £89m.

The group said total sales fell two per cent to £1.31bn, with sales at stores open more than a year down four per cent and gross margin up 160 basis points.

Swann’s strategy is based on cutting costs and improving gross margins by focusing on more profitable products – moving away from entertainment products -- CDs, DVDs, and computer games.