WH Smith said a "positive publishing schedule" meant that full-year figures would be at the top end of market expectations, a rather coy euphemism for roaring sales of breakthrough erotic novel Fifty Shades of Grey.
The revelation saw its shares hit an all-time high, but, given how adept the retailer has proved at grinding out profit improvement in a difficult sales environment, we'd still be buying the shares. It's on track to deliver £17m of costs savings this year.
That tight cost control meant gross margin improvement at both WH Smiths' high street and travel outlets, which also benefited as travellers to the Olympic Games bought higher-margin products such as sweets and drinks. That provides a solid foundation for new travel store openings both in the UK and overseas and, as broker Seymour Pierce notes, means that the business is becoming less dependent on Christmas trading. The broker expects pre-tax profit of £100.5m in the year to August 2012, rising to £106.6m in 2013.
The group also announced another £50m of share buybacks for the year to August 2013, but ever-improving cash flows means that it has already returned £377m to shareholders through buybacks and dividends since 2007.
