WH Smith hit with New Year gloom

WH Smith has suffered form its loss-making US operations

Stationery chain WH Smith has warned that poor sales of CDs and books will mean lower full year profits than previously expected.

The firm added that job cuts cannot be ruled out in the New Year as a result of the weak figures.

WH Smith shares plummeted by 20% following the announcement.

The firm is the first High Street retailer since Christmas to warn of a profits shortfall after a disappointing festive sales.

UK retail like-for-like sales for the 17 weeks to December 27 were flat.

By Friday afternoon trading the company's shares had recovered somewhat, but were still down 11.89% or 32.75 at 242.75.

Beverley Hodson, manager of the UK retail division, will leave the firm and her role will be assumed by the group chief executive Kate Swann.

"Although the full results for the Christmas period are not yet available, we now expect that a combination of disappointing sales and margin pressure will result in a material profit shortfall against current market expectations," said WH Smith in a trading statement.

Margin pressure was most intense in the books and entertainment categories, the company said.

Analysts had expected full-year profits of between £90m and £100m, but now expect the figure to be up to 20% lower than forecast.

These are, by any standards, disappointing results reflecting tough conditions

Kate Swann, chief executive WH Smith group

Latest WH Smith share price

A full operational and financial review of the business is underway which will necessitate a further stock clearance, a material write down and an exceptional operating charge in the current year.

As part of the review, Ms Swann said she has commissioned an overhead review at the Swindon and London offices.

The company has refused to rule out possible job cuts among its 31,000 staff as a means of saving money.

"These are, by any standards, disappointing results reflecting tough conditions in the UK high street and the fact that we have not dealt with those conditions as well as we should," Ms Swann said in the statement.