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Britain's WH Smith looks to squeeze suppliers to offset forex hit
October 13, 2016 / 9:35 AM / a year ago

Britain's WH Smith looks to squeeze suppliers to offset forex hit

File photo of pedestrians walking past a WH Smith shop in London, Britain October 6, 2008. REUTERS/Alessia Pierdomenico/File Photo

(Reuters) - Britain’s WH Smith Plc said it will lose its protection against a weaker pound next year and is looking to offset the impact by consolidating factories and negotiating better prices with suppliers to cut its costs.

The high street retailer is looking to curb an expected increase in costs associated with buying $30 million of stationery, after a hedge against the dollar expires next year, WH Smith Chief Executive Stephen Clarke said on Thursday.

“Since June 24, we have been talking to our suppliers and factories, looking at how we can reduce cost that might come through by consolidation of factories or through other productivity initiatives,” Clarke said on a conference call.

“We have made some real good progress there,” he said, adding that it was too early to say how much it would save.

Firms across Britain are having to mitigate the costs associated with the fall in the pound to near 31-year-lows once existing currency hedges expire, which could hit margins on imported goods.

The pound has fallen by 28 cents since the night of the vote, dropping to $1.2215 on Tuesday, while the average cost of imported goods in August was 7.6 percent higher than a year earlier, the sharpest year-on-year rise since 2011.

TRAVEL BONUS

WH Smith, which runs over 1300 stores, has seen a decline in comparable sales over last two years, as the wider industry contends with shoppers buying more online.

However, thanks to a steady 4 percent comparable sales increase from its 570-plus outlets at airports and railways station across the UK, WH Smith reported a 1 percent rise in like-for-like sales for the year ended August 31, a slight improvement on flat sales for the year before.

Its shares were up 3.7 percent to 1,582 pence at 0836 GMT, making it the top gainer on London’s midcap index.

WH Smith said it had not seen any rise in the number of tourists visiting its stores, despite forecasts that the pound’s fall could attract more overseas visitors.

“We have not seen any change in UK passenger numbers. Where we see an uptick of overseas passengers coming in, we will allocate our space accordingly,” Clarke said.

The CEO declined to comment on current trading, but said he expected good like-for-like sales growth in the travel business.

Editing by Alexander Smith

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