WHSmith: What the analysts say

“This will be Kate Swann’s last set of results and was therefore unlikely to bring any negative surprises. The numbers and the tone are all very much in line with our expectations and we can now look at our H2 estimates more closely, which we think are cautiously set.

“We believe WHSmith still has plenty of levers left to pull to mitigate structural pressures (both product mix management and cost control). On the high street in particular, we think there is an opportunity to take meaningful market share as the competition struggles.  Espirito Santo analyst Caroline Gulliver

“Another good performance from WHSmith. The drivers of growth have been the usual combination of sales down, gross margin up, costs down and cash generation enabling share buybacks.

“We remain holders with a Price Target of 700p, primarily because this is a familiar (if good) story and new investors will wait until prospects for travel improve.” Panmure Gordon analyst Philip Dorgan

“Shares have rallied ahead of results driven by short closing with the market having been concerned about the departure in July 13 of Kate Swann, chief executive officer, to be replaced by Steve Clark, a nine year SMWH veteran.

“Reiterate buy - we view SMWH as a sustainable long term double digit earnings per share growth story with travel as a high-single to double-digit growth business supported by a pedestrian high street cash cow.” Cantor Fitzgerald analyst Kate Calvert

“WHSmith continues to go against the grain of the high street, with its strict margin management being at the roots of a strong balance sheet and cash generative business model. Swann’s stewardship has seen WHSmith continue a promising growth story against an ailing high street where past rivals have faltered. Shifting the retailer away from lower margin entertainment products to books and stationery, in what seemed an unconventional strategy at the time, has emerged as a correct decision, as the likes of HMV and Zavvi have failed.

“The retailer’s financial management has also entailed a clever easing in discounting, in a climate where promotions are endemic in a fight for footfall. Collectively these moves have led to a decreasing reliance on seasonal trade; WHSmith used to make nearly all of its profit in the first half of the year, but under Swann that balance has fallen to under two thirds.

“WHSmith’s prudence has obviously not been without impact. Its instore environment is somewhat uninspiring and has distinctly ‘90s’ feel with its stock of stationery and books; while its customer service is ‘functional’ and unrefined, with staff pushing vouchers and discounted confectionary, and charging for carrier bags. These elements are less significant in fast moving travel destinations, but are more exposed in larger high street formats.” Conlumino consultant George Scott

“WHSmith’s results are a triumph for Kate Swann. Swann’s cost-cutting methods of steering clear of the entertainment market and focusing on more profitable products, has led the retailer to stellar success.

“Other retailers on the high street need to sit up and take note of the stationer’s successful strategy. WHSmith has continued to recognise how the market is moving as well as how consumers like to shop by streamlining its product offering and store portfolio.

“With Steve Clarke due to take over this June, WHSmith will need to maintain its performance keep afloat in the rising tide of multi-channel, supermarket and convenience store competitors.” Zolfo Cooper director Dan Coen