WH Smith became the first casualty of retailing's volatile Christmas yesterday as its shares fell more than 11 per cent on the back of a profit warning.
The group has sacked Ms Beverley Hodson, head of its UK retail chain, after a series of trading mistakes combined with fierce competition to leave sales flat. The group said its special offers had failed, hitting margins, meaning profits would be materially below City expectations.
Shares in WH Smith fell 30½p to 245p as analysts cut forecasts for full-year pre-tax profits by as much as 40 per cent to £65 million (€92 million). Many warned that the dividend would be cut, with some predicting a halving to 9p.
Ms Kate Swann, the chief executive who joined the group just eight weeks ago, said WH Smith was largely to blame for its problems. A poor Christmas performance in 2002 led to a more aggressive approach this time. But mixed pricing promotions, poor availability and bad product selection had confused shoppers.
Ms Swann will take direct control of the group's retail operations following the immediate departure of Ms Hodson, who is still negotiating her compensation package, which is likely to be controversial.
Ms Hodson, who was on a one-year contract, was given a one-off lump sum payment of £112,200 when she was passed over for the job of chief executive - even though she had presided over the chain through a series of profits warnings. That payment came in addition to her £330,000 salary with £107,000 bonus in the year to August 31st, 2003.
Ms Swann said she was setting up a review that was likely to lead to cuts among the 1,200 head office staff.
Company spokeswoman Ms Louise Evans said WH Smith could not rule out job losses. The group employs 31,000 staff. She added that analysts had cut their profit forecasts for the company.
Analysts also said the problems at WH Smith appeared to be largely of its own making and were unlikely to herald similar profits warnings elsewhere.
"We do not think there will be other profit warnings like this one, but there could be other profit disappointments," said one analyst.
"The internet is making life very difficult for people like WH Smith," said Mr Graeme Dickson, head of equities desk at brokerage Blue Index. "The competition out there is extensive." - (Financial Times Service, Reuters)