LONDON (Reuters UK) - WH Smith, the newspapers, books and stationery retailer, said on Wednesday it has traded as expected in its first quarter but remains cautious on the outlook in the run-up to Christmas.
"Whilst we remain cautious about the consumer environment and anticipate competitive trading in our markets over the key Christmas period, we have planned accordingly, and the current financial year has started as we expected," the group said.
At 8:04 a.m. shares in WH Smith were up 9 pence, or 2.5 percent, at 362.75 pence, valuing the business at 574 million pounds.
Before Wednesday's update the stock had lost just 5 percent of its value over the last year, outperforming the FTSE All Share General Retailers Index by 97 percent.
For the 10 weeks to November 8 the group's total sales increased 4 percent, reflecting the impact of recent acquisitions and new business wins.
Sales on a like-for-like basis, which strips out the impact of new space, fell 4 percent in the high street business.
In the travel business, which includes stores at airports, train stations, motorway service areas and hospitals, like-for-like sales were flat.
"Whilst airport passenger numbers in this period have, as expected, been soft, we have outperformed," the retailer added.
Both high street and travel figures were bang in line with forecasts from joint house broker Merrill Lynch.
Many UK retailers are struggling as shoppers cut spending amid rising unemployment, falling house prices and growing fears of recession.
However, WH Smith has a relatively low average transaction value of about 5 pounds so has been less impacted by the downturn in consumer spending.
The first-quarter performance reflects Chief Executive Kate Swann's strategy of cutting costs and improving gross margins by focussing on more profitable products, better sourcing and better control of markdowns, rather than driving top-line sales.
The mix of products has been re-balanced towards WH Smith's core categories of stationery, books, newspapers and magazines and away from entertainment products such as CDs, DVDs, computer games and consoles.
Analysts at Seymour Pierce reiterated their 'buy' recommendation, highlighting the businesses defensive characteristics, strong balance sheet and safe dividend.
(Reporting by James Davey, Editing by Erica Billingham)
