WHSmith has announced in its latest report (October 11) that despite a good performance on the high street, with a trading profit of £60m (down £2m on 2017), it has undertaken a detailed business review of its high-street businesses. The business review was conducted to assess how all areas of the high-street business are performing.
Group chief executive Stephen Clarke said in the report that he aims to achieve this by adopting a forensic store-by-store focus on space management, to optimise the returns from core categories.
Clarke names Stationery as the category with the most promise in turning this around, citing it as “an important area of investment in our High Street business with good economics and growth potential.”
He goes on to say: “It now generates around half our High Street sales and 60% of store contribution. The market remains robust, particularly for fashion and seasonal stationery.
“Our in-house design capabilities for product and packaging; the quality, breadth and depth of our ranges; our ability to source competitively through our Far East sourcing office; and our promotional offers and scale mean we can differentiate ourselves in this category.
“We work hard at identifying new and emerging trends and are able to adapt quickly to establish ourselves as market leaders in the latest phenomena in our markets.… in the second half of this year we responded quickly to the slime phenomenon by creating a one-stop-shop solution for customers to purchase pre-made slime and do-it-yourself slime kits.
“This ability to react quickly and become a market leader helped drive further revenue growth in the stationery category in the year.”
Beyond its high-street stores the retailer has grown its stationery business through a number of other initiatives.
An expanded gifting section in funkypigeon.com has contributed to profit growth. Its recent purchase of cultpens.com is cited as complementing its high-street stationery ranges and enhancing its customer offer. It has increased its focus on stationery on its online platform whsmith.co.uk, resulting in a sales increase of 10%.
Clarke included this report on Stationery’s performance: “Our strategy to build on our market-leading position in Stationery remains unchanged. Like-for-like revenue was up 3%, with gross margin slightly lower than last year reflecting mix.
“Stationery remains an attractive category for us with good economics and growth potential. During the year, Stationery has continued to be the main beneficiary of space with more stores benefitting from additional space towards the front of store and further range improvements.
“This additional space, combined with our range development initiatives drove good like-for-like revenue growth over the Christmas period (in categories such as calendars, single Christmas cards, wrap, diaries and decorations) and at back to school.
“In the second half, we responded quickly to the latest slime phenomenon with stores hosting a number of slime events and demonstrations.”
The review of its high-street business has resulted in the retailer planning cost-cutting measures such as winding down non-core trial initiatives like Cardmarket and WHSmith Local, and restructuring some operational activities. It has announced it will close around six high-street stores, particularly those suffering from the impact of onerous leases.
The national press is likely to seize upon the retailer’s planned store closures as the main story of this latest report, but for a balanced view, it’s important to see the move in the context of its operating 607 stores (31 August 2018) and its clearly articulated business strategy to focus on stationery to deliver sustainable profit.