The book and magazine chain WH Smith has reported disappointing sales over the festive period.

Its High Street shops saw like-for-like sales - which ignore the effects of store openings and closures - fall 3% on last year for the five weeks to 11 January.

WH Smith said it lost market share to price-cutting rivals, but added that it had managed to improve profit margins.

Sales at its hotel and airport outlets in the US also fell short of expectations as the businesses struggled against the downturn in tourism and international travel.

US retail sales grew by 3%, but the group said trading remained difficult with the weakness in the US economy hindering recovery.

Shares in WH Smith fell 12 pence to 284p on Wednesday.

Price battle

Discounting on fiction books and CDs by High Street rivals pulled business away from WH Smith over the Christmas period, although DVD sales remained strong.

But chief executive Richard Handover said the company had made a deliberate decision not to match price cuts by competitors.

"Over the Christmas period our focus was on improving margins and driving operational efficiencies," Mr Handover said.

"A deliberate decision was taken not to chase unprofitable sales. The sales performance reflects this tactical positioning."

The group said its gross profit margin for its UK shops rose by two percentage points.

Mr Handover added that Smith's Christmas range for 2003 would be much stronger.

"We will be increasing the range and quality of our gift offer in 2003," he said.

"It takes time to bring these things through from thought process to fruition."