Fifty Shades of Grey sequel and adult colouring books boost WH Smith profits

50 Shades Of Grey

An eclectic mix of sex, literary fervour and colouring by numbers helped WH Smith’s high street stores outperform expectations over the past three months.

The retailer said its annual profits would be slightly above expectations of £121m after strong sales of EL James’s latest book, Grey, Harper Lee’s Go Set a Watchman and a craze for adult colouring books.

Despite the strong book sales, analysts believe underlying sales at WH Smith’s high street outlets were likely to have fallen by about 4% compared with last year, continuing their long-term decline. The book sales are also unlikely to have helped profits amid heavy competition over sales of popular titles.

WH Smith stores in airports and other travel locations did not appear to have been affected by the dispute over VAT, in which it emerged that a number of retailers request passengers’ boarding cards to avoid paying 20% VAT on items sold to customers travelling outside the EU.

Businesses have been accused of banking the saving rather than passing it on to shoppers. WH Smith admitted it did not pass this saving on to individuals, but used the money to fund general discounts and savings across its airport stores.

“Travel continued to deliver a strong performance with good sales across all of our core channels reflecting continued investment in our key business initiatives and growth in passenger numbers,” WH Smith said in its trading update.

Analysts at RBC estimated that underlying sales at WH Smith’s travel stores had risen by about 5% in the past three months and profit margins were also ahead.

“So far [the VAT issue] appears to have seen minimal impact,” Tony Shiret, an analyst at Besi, said. “That is not to say that this will not become more of an issue but we feel that it is likely to be a very low single-digit millions type of issue at worst.”

Powered by Guardian.co.ukThis article was written by Sarah Butler, for theguardian.com on Thursday 20th August 2015 12.29 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010

 

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