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Last Updated: Thursday, 16 October, 2003, 07:07 GMT 08:07 UK
WH Smith still struggling
WH Smith shop
Profits continue to fall at retail and publishing giant WH Smith.

The company, which is extricating itself from its loss-making US operations, blamed falling sales in its core UK retail division and increased pension liabilities.

It singled out the music sector, which has been hit by price-cutting and slow CD sales, as the main culprit.

Pre-tax profit for the 12 months to 31 August were down 13% at 102m - the second year running profits have fallen.

Downturn

That was before an exceptional charge of 46m mostly relating to the US businesses.

WH Smith's American hotel and airport outlets, sold last month, had been leaking cash for two years because of the downturn in travel since the 11 September attacks.

In the main UK business, cut-price competition has hurt sales and profit margins.

Entertainment products such as CDs have been on the slide since Christmas, although DVD sales continued to rise.

The entertainment category contributes about 20% of group sales but is under attack from supermarkets like Tesco. and specialist rivals like HMV.

Harry Potter effect

The group's publishing arm Hodder Headline saw sales rise 5% over the year, on the back of bestsellers from Martina Cole and Kate Adie.

But the halo effect of the new Harry Potter book helped book sales to rebound strongly in the second half of the financial year.

Sales were up 11% - and 5% excluding Harry Potter - but deep discounting of the boy wizard's latest adventures also cut into profit margins, which were down 3%.

Sales across the UK retail division as a whole had suffered in recent weeks, the company said.

"This year has started the way we finished last year, with extremely testing trading conditions," said chief executive Richard Handover, who due to become chairman next month.

New chief executive Kate Swann joins on 1 November, hoping to break the cycle of disappointment.




SEE ALSO:
Universal Music slashes jobs
16 Oct 03  |  Business
WH Smith jilts AOL book unit
28 Mar 03  |  Business
Christmas sales slide at WH Smith
29 Jan 03  |  Business
WH Smith appoints new chief
04 Jul 03  |  Business


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