 WH Smith struggles to find its place on the High Street |
Struggling retailer WH Smith has plunged into the red, making one of the worst losses in its 212-year history. The company reported an annual pre-tax loss of �135m ($242m), as it was hit by exceptional charges of �200m linked to unsold stock and restructuring costs.
Sales at its 673 UK stores fell by 2%, with the company hit by falling book and music sales.
There is no immediate sign of a recovery, with High Street sales down 2% in the six weeks to 9 October.
Despite the figures, WH Smith's shares rose 6.75p to 326p in morning trade as analysts speculated about a possible bid for the company.
Earlier this year, WH Smith was the subject of an aborted takeover bid by venture capital firm Permira.
'Unacceptable performance'
 |  We still face considerable challenges  |
WH Smith has been struggling to cope with intense competition from specialist retailers and supermarkets, which also sell books and magazines, on the High Street. "The High Street retail business delivered an unacceptable performance following weak Christmas trading," said chief executive Kate Swann.
Retail profits slumped 66% to �25m in the year to the end of 31 August while overall sales, including WH Smith's better-performing newspaper distribution arm, slid 3% to �2.8bn.
WH Smith recorded a pre-tax profit - before the exceptional charges of �200m - of �67m, compared to �102m last year.
City analysts said that this underlying profit of �67m was in line with expectations.
Liz Wynne-Roberts, global equities strategist with ODL Securities, described the results as "pretty gloomy".
However, she added: "We do think that this may be the nadir of their fortunes."
Retail overhaul
The firm, which blames the decline on a sharp drop in sales of music and videocassettes and its decision to scrap unprofitable book promotions, admitted it still faced huge challenges.
"Although we are making progress in improving the business, much remains to be done and we expect to face tough competition in our core markets this Christmas," Ms Swann added.
Already, the company has cut costs, strengthened its management, improved the look of its stores and their range of products.
When she became chief executive last year, Ms Swann promised to overhaul the company's operations in order to focus on its core UK retail and distribution businesses.
| WH Smith history Founded in 1792 by Henry Walton Smith Started as newsvendor in central London Britain's leading news outlet by mid-19th century Bought 230 stores from John Menzies in 1998 673 shops across the UK with outlets at airports and railway stations About 30,000 employees |
A string of assets have since been sold including businesses in Australia, New Zealand, Hong Kong, Singapore and the United States.
Publishing business Hodder Headline was sold to Hachette Livre for �223m, although WH Smith made a �48m loss on the deal.
WH who?
Critics claim WH Smith lacks a distinct retail identity and that shoppers no longer have a real reason to visit its stores.
Specialist retailers such as HMV, Waterstone's and Ottakar's offer a far wider range of music and books while online retailers such as Amazon have eaten into its sales.
It has also been squeezed by Asda and Tesco which sell basic stationery and magazines more cheaply.
Attempts at diversification -such as a foray into publishing- have not been particularly successful.
Analysts also believe WH Smith has not made the most of areas where it has traditionally been dominant, such as home office supplies and educational material.
"WH Smith is compromised strategically," Matthew McEachran, an analyst at Investec, said.
"Kate Swann is trying to address some of the operational weaknesses of the business which is helpful.
"However, this leaves the big problem of how does WH Smith fit into the High Street?
"They are putting their faith in being a 'destination' shop but it does not feel that way at the moment."
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