WH Smith on the up thanks to cost-cutting drive

WH Smith showed today that despite the harsh conditions on the high street, it is perfectly possible to run a profitable retailer.

For the year to August profit was up 5% to £109 million, allowing the company to push on with share buy backs and boost the dividend, up 16% to 22.5p.

That's despite falling sales - they are down 3% - which indicates that Smith's has been able to widen margins.

Chief executive Kate Swann reckons sales are likely to keep falling, at least for the next two years.

"I doubt many retailers will be forecasting growth in like for like sales," she says." But if you innovate customers will spend."

The latest move from Smith's is a deal with Kobo, an eBook provider. It will start selling Kobo's WiFi eReaders at £89.99, giving customers access to 2.2 million book titles.

The strike against the company is that while the City is pleased, customers are increasingly less impressed.

A survey last year by Which? put Smith's joint bottom in a customer satisfaction survey, prompting the BBC to ask "have we fallen out of love with the nation's newsagent?"

Swann, paid £4 million last year, was dismissive of this notion. "Common sense tells you that's not right. It simply doesn't hold true," she said. "It's difficult to get good profit results if people don't like you."

Smith's has avoided falling into the Woolworths/HMV trap by pulling out of entertainment. CDs and DVDs now account for only a small percentage of sales.

The company has returned £366 million to shareholders since 2007. That compares to a market cap today of £738 million. The shares slipped 3.5p to 524p.