WH Smith Plc Maintains Profit Margin Improvements Trend

Strong profits performance from WH Smith plc (LON: SMWH) despite sales decline.

Mark Stones

Mark Stones (TMFMumbojumbones) joined The Motley Fool in 2014 and initially worked as a writer for Fool.co.uk, before joining the Fool’s analyst programme. Mark earned a BA in English from Loughborough University. Although he spends more time reading annual reports than Russian literature these days, he still appreciates a novelist’s antipathy toward the accepted view, which is a useful attitude when trying to sniff out hidden gems on the stock market. His approach to investing has been largely influenced by the principles of Warren Buffett and Peter Lynch. He also takes a special interest in the work of healthcare companies. Outside of investing, Mark plays guitar, enjoys good writing and has a guilty passion for combat sports.

Published 22 January, 2014 8:48 am GMT

| More on: SMWH

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

The shares of WH Smith (LSE: SMWH) closed at 1,016p yesterday prior to today’s announcement of Christmas trading results.

The FTSE 250 member confirmed total sales were down 4% between September-January with a decline in like-for-like sales of the same amount.

WH Smith added that the high street performed in line with expectations. Total sales were down 6% and like for like sales down 1%.

The bookseller and stationary retailer continued that declining sales were accompanied by profit margin gains, which is a familiar pattern for 222 year old company.

Commenting on the announcement, chief executive Stephen Clarke, stated:

“During the period we have delivered another good profit performance across the Group with costs tightly controlled and further improvement in gross margin.

“Looking ahead, we continue to plan cautiously and manage the business tightly while investing in new opportunities for future growth. We are confident in making further progress in the year.”

Prior to today City experts were expecting Smith’s annual results to show earnings of 75p per share and a dividend of 34p a share. Therefore the shares trade on a P/E of 14 and yield a possible 3%.

Of course, whether those ratings, today’s results statement, as well as the wider prospects for the retail sector combine to make WH Smith a buy is something only you can decide.