WH Smith keeps sales on even keel in third quarter

Sales growth at WH Smith remained almost unchanged in the third quarter, with the retailer saying profit margins were improving and it was confident in hitting full-year targets.

For the 15 weeks to 10 June, the group reported total sales up 2% compared to the same period last year and flat like-for-like sales, as it had for the first half of the year.

"Whilst there remains some uncertainty with regard to the broader economic environment, we continue to focus on profitable growth, cash generation and investing in the business to position us well for the future. We remain confident in the outcome for the full year," WH Smith said in a short statement on Wednesday.

The Travel division, which operates stores in stations and airports, saw total sales slow to 8% from the 10% in the first half, with 2% related to foreign exchange benefits, while LFL sales remained at 5%, helped by passenger numbers continuing to increase.

Gross margin increased in line with management's expectations, while the new store opening programme stayed on target to open 15 UK units this year, with six openings for directly operated units across both Rome airports due to open in July, adding another country to its European presence in Alicante and Dusseldorf.

The UK-focused High Street remains focused on improving profits, with total sales down 4% as in the first half but LFL sales falling 4%, which is worse than the 3% in the first half but management said was in line with expectations.

Gross margin improvement and cost savings have remained on target, with 58 of the 61 Post Offices relocated since April last year to bring the total number of Post Offices to 165.

In choppy morning trade, Smith's shares were up 14p or 0.8% to 1,758p, having retreated from April's 12-month highs above 1,820p.

Analyst Kate Calvert at Investec felt it was another strong update with good Travel momentum going into peak summer trading and High Street performing in line with expectations.

Travel's wins in Rome supports her view that the company "is increasingly becoming a play on international travel retail with an attractive proven model".

Calvert left her forecasts unchanged -- "with risk on the upside" -- but increased her target price to 2100p from 1900p.