WH Smith Shares – Passable Yet Profitable

In the early 1790s, Henry Walton Smith created a small independent news vendor in London. Over the next two hundred years, this small operation would grow to become the largest of its type in the United Kingdom and would become the first officially recognised chain store in the world. Sadly, as times and technology have changed WH Smith ran into its fair share of trouble in the early 21st Century. This trouble hit the company and WH Smith shares hard, but as they say, you can’t keep a good dog down for long.

When Stephen Clarke took over from Kate Swann eyebrows were definitely raised regarding his ability to carry on her good work. Because in spite of the company’s slight turnaround WH Smith still seems dated and out of place in today’s society. Thankfully, those who own WH Smith shares needn’t have had such worries. Even though it no secret that WH Smith’s pricing strategy just can’t compete with most online retailers, Clarke has still managed to push the unglamorous brand in a forward trajectory. You will hardly hear of or see people clambering to shop in their high street outlets, but it evident that the company is still shifting a notable about of products.

It seems that WH Smith’s management team (headed up by Clarke) have changed the way they approach retail for the better. It has been music to those who have invested in WH Smith shares and market analysts alike. Instead of scrambling to create an all-in-one retail outlet and fighting against the tide, they have restructured in a way that means they are now a far more streamlined outlet. Clarke has carried on what Swann started by trimming the fat and cutting the company’s operating costs dramatically. The stores may still look well past their prime and in need of a good makeover, but the entire cost-cutting process has seen the companies profits shoot back into the black and stay there. WH Smith has been constantly earmarked as a company that is on its way out, yet the figures have proved such statement wrong time and time again.

What’s more is that the company has even gone public with their success, praising investors and promising a “good profit performance” going forward. Yes, there has been a 7% fall in sales during 2014, but that figure is misleading. Those who own WH Smith shares have seen profit come their way, as they returned £50 million in cold hard cash to shareholders. Proving profitable isn’t everything if you can cut costs as ruthlessly as WH Smith has done.

The company’s success can’t all be placed upon their managed decline either, as some of the stores in their ranks are performing well. Airport and railway stores are still performing and pushing through sales in spite of online and high street store failings. WH Smith shares should show investors one thing, should you manage it well, you can still make a profit from an age-old and stumbling high street presence.

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