The boss of retailer WH Smith has said the group will face a £7 million cost impact from the Budget’s move to hike national insurance contributions, but said it will be “manageable” without having to increase prices.
Carl Cowling, chief executive of WH Smith, told the PA news agency that next year’s extra cost would come on top of a £13 million increase in its wage bill due to the planned rise in the minimum wage also announced in the Budget.
He said the minimum wage rise was already expected and budgeted for, and while the national insurance hit was not forecast by the group, he is aiming to offset it through cost savings and not by raising prices or cutting jobs.
He told the PA news agency: “It’s manageable. Quite a lot of our business is outside the UK.”
He said while the group “can never rule anything out” in terms of possible price rises, he added: “It would be my intention not to.”
Many retail rivals, including Sainsbury’s, Marks & Spencer and Asda, have warned in recent days that they may need to pass on the costs to customers.
WH Smith is increasing its international business, with annual results on Thursday showing a 16% rise in profits as its global travel arm continued to drive sales higher.
The group reported underlying pre-tax profits of £166 million for the year to August 31 – up from £143 million the previous year.
Trading profits jumped by 15% to £189 million in its shops based in railway stations, airports and hospitals worldwide, with earnings in those outlets in the UK leaping by a fifth.
Earnings remained flat at £32 million in its traditional high street business despite a 2% drop in like-for-like sales thanks to cost-saving efforts.
The firm said it is focusing on growth in travel shops across North America, with a pipeline of around 60 new stores under its belt and the group bidding to take on another 15 across major US airports.
The company is hoping to have around 500 shops across US travel sites by 2028, with the American business set to account for around 30% of the firm’s sales – up from the current figure of about 20%.
WH Smith is also continuing to expand its UK travel chain. While it opened 14 sites over the past financial year and shut eight, it aims to open around three to eight on a net basis over the year ahead.
However, it continues to shrink its UK high street division which stands at 500 sites after the closure of 14 sites, and the firm is expecting to shut a similar number in the current financial year.
The company added that it has around 470 store leases due for renewal over the next three years, including 100 where it is in active negotiations with the landlord.
“We only renew a lease where we are confident of delivering economic value over the life of that lease,” it said.
WH Smith said: “As we grow travel, the high street division will become a smaller part of the overall group.”
The high street business now accounts for around 15% of annual group trading profit, it confirmed.
But WH Smith is seeking to breathe new life into its high street business by rolling out Toys R Us concessions nationwide, with 30 already opened and another 37 due to launch by Christmas.
It also recently announced it is bringing back vinyl records for the first time in more than 30 years across 80 high street shops and also launched a range of festive sandwiches to tap into growing demand for food across its stores – especially in travel and hospital-based sites.