Wh Smith Share Discussion Threads

[yorkie123] 03/1/2004 15:57

Good reasoning Keith. Looking to buy these at aroung 180p following disappointing news later this month from other retailers.

[keith95] 03/1/2004 14:21

PTJ:

(i) Buy versus sell figures from ADVFN are estimates, and you ignore the 1.8 million unknown trades recorded by ADVFN. You only need a couple of delayed "O" trades to throw out the ADVFN figures. Work out the AT trade buy and sell volumes if you want to get an idea of market movements because these trades accurately reflect the time and price of a trade. Better still get a hold of daily VWAP (volume weighted average price usually worked out using AT trades only.) which for SMWH was sitting around 236 for the most of yesterday afternoon.

(ii) I suspect that SMWH sneaked out the profit warning yesterday to try and get the bad news out on a low volume trading day to minimize the devastation on its share price or at least during a trading week that was generally optimistic.


(iii) What typically happens with a profits warning as dire as SMWH's, in my experience, is a sharp drop followed by a brief rally as shorters from the previous night, and bottom fishers on the day push up the price temporarily. There is then a second wave of severe shorting that takes place shortly after. Clearly that second wave did not happen yesterday, but with many dealers away from desks and with the weekend press having a field day on SMWH, I would not like to be long next week.

(iv) NAV on this share is around 170p (according to ADVFN figures) which represents a target price (for me).

(v) No position on this share at the moment, but if the rally does continue on monday (which I doubt very much), then it represents an excellent shorting opportunity as the safest way to play this share especially if other retailers (woolworth as a prime candidate) issue updates that are below market expectations.

(vi) The chance of an upside, would base itself on the phrase "expecations are already poor" and already factored into the price. Hardly a reason for going long other than for a day-trade IMO.

[ptj] 03/1/2004 13:57

Decided to remove as I thought, hey why give my analysis (my business edge) away to you complete strangers!!

;-)

[m.t.glass] 03/1/2004 13:09

As one of said muppetts, who recklessly ignored your advice and shorted at 360p (see can I ask if you stand by the forecast given in this thread title?

By my calculations (correct me if I am wrong), but from Friday's closing price, and after allowing for the dividend gains already made, you require share price growth of 29.4% over the next 6 weeks in order to achieve an overall gain of 25% a year on.

It isn't impossible of course. It only requires the share price to be back where it was one month ago. And if that happens we'll all be smiling. You for calling it right despite the storms in between, and us shorters for having banked even better gains already ;-)

Edit: Ah! I see from your subsequent postings I read it wrong. Title says 25% within a year, not one year on. And that did happen not long after, so I must apologetically withdraw my sceptical little dig at your investment skills. Clearly I have much to learn from you ;-)

mtg

Edit:

[ydderf] 03/1/2004 12:25

you muppets all seem to miss the point:

1. It can be dealt in size - £10,000-500,000 in a deal no problem, so serious money can be made and proper rewards available for getting it right.
2. It will be either broken up or rerrated, so -
3.....players in it have zero interest in the future of video or book retailing - who gives a stuff about whether it has a future?
4. Capitalised at 600m smwh has a gropwing publishing biz making 20m, a growing news dist biz making 32m and a retail/travel biz which made 90m last year and probably will in 2005 - if it's still independent!

[m.t.glass] 03/1/2004 11:40

Banter - your point is a potentially very expensive one that the company has not been able to put a figure on, and which will have to be among the write-offs yet to be declared (though some of it is no doubt accounted for within the reference to reduced margins). Shop staff I commented to about theft of CDs took the line that unscanned (unwiped) merchandise would trigger the exit alarms. But kids know how to beat that with ease (they exit the store in groups, pockets stuffed with tagged items which trigger the alarm. The one (decoy) who is carrying nothing steps back inside with hands up and presents himself for inspection, meeting up with his mates later. Alternatively they take the CDs from the cases if poorly sealed. All very familiar methods apparently (according to tv crime prog). And losses from cases can't be quantified till all are checked).

mtg

PS: Having just quickly read this entire thread again, it is interesting to note how we amateurs have been one or more steps ahead of the experts in assessing WHSmith's plight throughout the past few months... For anyone who has the time this weekend it's worth a read, especially as so many contributors have usefully included charts alongside their comments as the story unfolded.

PPS: Latest statements don't include any comment on the pensions shortfall. Some weeks ago staff were invited to henceforth hand over 8% more of their pay to help balance the books. The company is now having to plan serious cuts among its 31,000 workforce. As well as redundancy payments, many of those who leave will take pension entitlements with them and will no longer be among those paying the raised contributions called for. In such situations a company will quite often find itself having to dismiss staff on the basis of how their departure or continued presence impacts on the pension scheme, rather than on how skilled or useful those people are. And the ones who remain may be asked to contribute even more.

[m.t.glass] 03/1/2004 11:01

More bad news: it is now expected there will be an investigation by the Financial Services Authority (FSA) into the company for "creating or allowing a false market" in the company's shares (by concealing bad news that could/should have been made known to shareholders sooner under LSE rules). Major shareholders who lost out will be among those demanding action.


WH Smith warns as cuts backfire
Patrick Hosking, Evening Standard

SHARES in WH Smith slumped today after the retailer issued a torrid profits warning and sacked Beverley Hodson as head of the core UK chain.

In the first Christmas trading statement from a listed retailer, Smith warned that profits would be materially below current City expectations. Heavy promotions and price cuts had failed to boost sales, it said.

Hodson, managing director of UK retail, was going 'with immediate effect'. Group chief executive Kate Swann, who joined in November from GUS, will take over.

The sacking is likely to trigger a fresh 'rewards for failure' row. Hodson is in line for a £330,000 pay-off on top of the controversial consolation prize of £112,000 she was given when she was recently passed over for the top job.

Swann warned there would be further job losses among the 1,200 management staff in London and Swindon after a three-month review.

Smith's shares plunged 30 1/2 to 245p as analysts downgraded full-year profits forecasts from between £90m and £100m to between £60m and £70m. It is the retailer's third profits warning in 12 months.

Swann, revealing that sales in the 17 weeks to 27 December were flat and the gross* margin down by two percentage points, admitted: 'These are, by any standards, disappointing results reflecting tough conditions in the High Street.' But she added: 'We have not dealt with those conditions as well as we should.' Displays were badly configured, promotions were 'confusing' and 'execution was quite poor', with shelves not being properly replenished. The decision to cut prices aggressively in the pre-Christmas period backfired.

'Sales volumes, particularly in the entertainment category, did not compensate for the fall in gross margin,' the company said. In stationery, margins held up well but sales were disappointing.

Alerting the stock market to more trouble ahead, WH Smith also warned it would have to clear surplus stock in the New Year and there would be a one-off write-down. Furthermore, a 'full operational and financial review' would necessitate 'a further stock clearance with a consequent material write-down'.

The publishing division Hodder Headline and newspaper distribution arm continued to trade well. Total like-for-like sales were flat. The biggest problem areas were entertainment, which was down 3%, and stationery, down 2%.

Swann said that it had been a mistake to relegate core lines such as books and stationery to the back of the shops to make room for gifts. Customers had not always understood the 'three for two' and 'two for £20' promotions, and getting to grips with a new stock replenishment system had taken time.

Swann admitted that it was not the first eight weeks in the job she had expected. 'But it's not all gloom and doom. It's a business with a lot of things going for it.'

False market claim denied
WH SMITH laid itself open to a charge of misleading shareholders by waiting two and a half weeks to confirm the bad news.

The Mail on Sunday said on 14 December that WH Smith would issue a profits warning, that sales of CDs and DVDs were poor and that Beverley Hodson would be dumped. But the company stayed silent.

Spokeswoman Louise Evans said: 'We still had two weeks to Christmas to get through.'

The Financial Services Authority is expected to investigate.


Edit: I have highlighted in blue a point now made by Kate Swann which I and others made several weeks ago on this BB (see posts 55,57,64) regarding the display and service errors that were apparent in the shops we visited. And the point highlighted in red is being missed by some newspaper reports - it isn't a reiteration of current admissions and actions, it is a warning that they expect to have to issue news and details of additional write-downs at some later date, and there is absolutely no way of measuring how big these will be. They may be minor, or they may be several times bigger than the ones that sparked this week's price plunge.

[banter] 03/1/2004 10:27

also having cd's etc live on shelves is a big mistake in my view, i know the shop where my wife works has had record thiefing this year. this has seriously got to effect profits, when your virtually giving things away. this idea came from the top management, i think that says it all. about time for a change?

[yf23_1] 03/1/2004 02:54

Well done MTGlass, hope you made lots of dosh.
I closed at 300 and never got back in.

[m.t.glass] 02/1/2004 22:43

Heads were long expected to roll. Bev Hodson has gone but I reckon certain institutional holders will push for the chairman to go too. He should have left already and someone fresh appointed to what is a key role, not got pushed upstairs just because he's always been there (since he was a teenager) and doesn't want to leave. He is a stale face and part of the problem.

[m.t.glass] 02/1/2004 22:41

Heads were long expected to roll. Bev Hodson has gone but I reckon certain institutional holders will push for the chairman to go too. He should have left already and someone fresh appointed to what is a key role, not got pushed upstairs just because he's always been there and doesn't want to leave. He is a stale face and part of the problem.

[richardbonny] 02/1/2004 21:22

Looks like a great opportunity but not yet. Need to wait a bit until the bad news is all out of the way and they have a recovery plan which people can believe in. Actually I think their shops need a major overhaul to be able to compete with the internet and supermarkets not to mention better bookshops. I am watching to buy in - but only at a much lower price than current...

[detmij] 02/1/2004 19:43

Oops. All the partying yesterday meant I was not home till about 3.30am this morning guess what - I slept through the profit warning. Just as well really as I would have probably bought a few at about 2.20-30p. My feeling after reading the profit warning tonight is the bear market here is far from over. The warning was very short on facts which leaves plenty of scope for more bad news to follow as the size of the problem becomes quantifiable.

Nothing either about the dividend which will worry income investors. 13p this year was talked about but now that looks over optimistic suggesting further falls in the share price. With big institutions holding large blocks of shares some will now be keen to reduce thir exposure.

Thinking about it I'm pleased to have slept through the fun this morning. What you lot got today while I was asleep was a trickle of information and not all the bad news in one fell swoop.

You'll be pleased to know when I did wake up I didn't have too bad a hangover. With WHS I think it will be more a case of overhang (in shares) when many investors dump their holdings. I am happy to wait further share price falls and c.£2.00 remains my target price to accumulate more shares here.

The share price rise off its mornings lows should leave plenty of room for the shorters who closed their positions to have another go on this one, especially if profit warnings become the norm in this sector over the next week or two.

[billox] 02/1/2004 19:02

hope you sold before close

[ya2000ss] 02/1/2004 17:09

I boght in today and out in the same day for 15p profit p.share give me very good start for the year.

[adebola] 02/1/2004 16:10

I fail to see how anyone would want to buy this right now. It has further to fall,Profits have halved and there is obviously little idea how to sought the mess out. £2 is my shout. We shall have to see.

[billox] 02/1/2004 16:07

well thats that then!

[adebola] 02/1/2004 15:56

WH Smith issues profit warning after weak christmas
By Lisa Urquhart in London
Published: January 2 2004 8:41 | Last Updated: January 2 2004 10:37


WH Smith on Friday warned on profits following disappointing sales over the Christmas period, and said Beverley Hodson, managing director of UK retail, would be stepping down immediately.


The UK high street retailer, which took the decision to bring forward its Christmas trading statement because of the poor sales, said this and pressure on margins would result in a material shortfall in profits against current expectations.

In early trading WH Smith shares fell more than 21 percent, although they later recovered slightly to trade down just under 14 per cent at 238p.

In the 17 weeks to December 27 WH Smith revealed flat like-for-like sales across the group, with gross margins down 2 percentage points, as the group increased its promotional activity to drive sales.

But the increase in volumes, particularly in the highly competitive entertainment category, which includes CDs, books and DVDs, failed to offset the fall in gross margins.

There had been speculation during December that the group might be among a number of retailers issuing profits warnings after Christmas following poor sales in the run up the the Christmas period.

In the 17 week period WH Smith high street reported flat like-for-like sales, with like-for-likes at WH Smith travel retail up 3 per cent. WH Smith online reported like-for-like sales of 3 per cent.

Organic sales in the key product categories were also mixed. Like-for-like sales of books were up 2 per cent but stationery sales fell by 2 per cent and, while news and express was up 3 per cent, like-for-like entertainment sales were down 3 per cent.


Hodson pays the price of Christmas failure


Beverley Hodson paid the price for a disappointing Christmas at WH Smith. Her exit as managing director of UK retail brings to an abrupt end a career with the company that began six years ago with high hopes of a turnround.
Go there

Louise Evans, media relations manager, said as well as the increased competition from other retailer, that some of the blame could be laid at the door of the group's promotional activity. "It did lack clarity and at times confused the customer," she said.

Ms Evans also said that too many products had also been skewed towards the premium end at the expense of the group's core products.

Availability problems, which had resulted in some popular products selling out and the introduction of non-core gift items were also listed as reasons for the poor sales.

Kate Swan, chief executive, who is taking operational control of UK retail following Ms Hodson's departure said: "These are, by any standard, disappointing results reflecting tough conditions in the UK high street".

She added that her immediate focus would be be to improve performance by strengthening the senior management team and undertaking a detailed operational and financial review of the business.

Hinting a further job cuts Ms Swan said that she had commissioned an review of the group's head offices in Swindon and London with a view to streamline key processes and "delivering a material reduction in the cost base".

WH Smith has 1,200 staff working at the two offices.

The weak sales are now expected to trigger heavy discounting at the group, which will further impact operating profits as WH Smith tries to clear surplus stock.

Additionally the group announced a full operational and financial review of the business, which will result in more stock clearance and write-downs.

WH Smith, which declined to put a figure to the possible loss from discounting, said the write-down on assets would be taken as an exceptional operating charge in the this year.

WH Smith also reported that its underlying costs had risen by 4 per cent, on top of marketing cost that were up by £3m in the year.

Richard Ratner of Seymour Pierce said: “What has emerged can only be seen as disastrous.” He added that given the group’s dependence on Christmas, he had now downgraded full year forecasts from £108m to £68m.

He also said the group might also cut its dividend given the results and its stated aim of increasing dividend cover to 2 times.

[adebola] 02/1/2004 15:55

WH Smith issues profit warning after weak christmas
By Lisa Urquhart in London
Published: January 2 2004 8:41 | Last Updated: January 2 2004 10:37


WH Smith on Friday warned on profits following disappointing sales over the Christmas period, and said Beverley Hodson, managing director of UK retail, would be stepping down immediately.


The UK high street retailer, which took the decision to bring forward its Christmas trading statement because of the poor sales, said this and pressure on margins would result in a material shortfall in profits against current expectations.

In early trading WH Smith shares fell more than 21 percent, although they later recovered slightly to trade down just under 14 per cent at 238p.

In the 17 weeks to December 27 WH Smith revealed flat like-for-like sales across the group, with gross margins down 2 percentage points, as the group increased its promotional activity to drive sales.

But the increase in volumes, particularly in the highly competitive entertainment category, which includes CDs, books and DVDs, failed to offset the fall in gross margins.

There had been speculation during December that the group might be among a number of retailers issuing profits warnings after Christmas following poor sales in the run up the the Christmas period.

In the 17 week period WH Smith high street reported flat like-for-like sales, with like-for-likes at WH Smith travel retail up 3 per cent. WH Smith online reported like-for-like sales of 3 per cent.

Organic sales in the key product categories were also mixed. Like-for-like sales of books were up 2 per cent but stationery sales fell by 2 per cent and, while news and express was up 3 per cent, like-for-like entertainment sales were down 3 per cent.


Hodson pays the price of Christmas failure


Beverley Hodson paid the price for a disappointing Christmas at WH Smith. Her exit as managing director of UK retail brings to an abrupt end a career with the company that began six years ago with high hopes of a turnround.
Go there

Louise Evans, media relations manager, said as well as the increased competition from other retailer, that some of the blame could be laid at the door of the group's promotional activity. "It did lack clarity and at times confused the customer," she said.

Ms Evans also said that too many products had also been skewed towards the premium end at the expense of the group's core products.

Availability problems, which had resulted in some popular products selling out and the introduction of non-core gift items were also listed as reasons for the poor sales.

Kate Swan, chief executive, who is taking operational control of UK retail following Ms Hodson's departure said: "These are, by any standard, disappointing results reflecting tough conditions in the UK high street".

She added that her immediate focus would be be to improve performance by strengthening the senior management team and undertaking a detailed operational and financial review of the business.

Hinting a further job cuts Ms Swan said that she had commissioned an review of the group's head offices in Swindon and London with a view to streamline key processes and "delivering a material reduction in the cost base".

WH Smith has 1,200 staff working at the two offices.

The weak sales are now expected to trigger heavy discounting at the group, which will further impact operating profits as WH Smith tries to clear surplus stock.

Additionally the group announced a full operational and financial review of the business, which will result in more stock clearance and write-downs.

WH Smith, which declined to put a figure to the possible loss from discounting, said the write-down on assets would be taken as an exceptional operating charge in the this year.

WH Smith also reported that its underlying costs had risen by 4 per cent, on top of marketing cost that were up by £3m in the year.

Richard Ratner of Seymour Pierce said: “What has emerged can only be seen as disastrous.” He added that given the group’s dependence on Christmas, he had now downgraded full year forecasts from £108m to £68m.

He also said the group might also cut its dividend given the results and its stated aim of increasing dividend cover to 2 times.

[m.t.glass] 02/1/2004 15:44

3 Jan (a non-trading day) is an error. L2 does show price already XD since Wednesday. There is nothing in today's statement to contradict the hint previously given by former chairman that divi may have to be sacrificed.

[ydderf] 02/1/2004 15:41

245-6 lolololololololololololololololololol

Maybe tomorrow will bring some more ill-informed and stupid comment and get the price back down again, then i can pick up another 50 or so at £2, one prominent analist today reckons they are only worth 180 on a divi cut to 9p etc ...........where would we be without out 'em, bless their little cotton sox!

[stephenrichards] 02/1/2004 15:38

Does anyone know when the ex div date actually was....Smith's website states the 31/12....whilst ADVFN claims 03/01? Bought in this morning and the shares weren't showing as Ex-div......

[adebola] 02/1/2004 15:32

Ex div was 31/12. Shares fell 12p. I dont know where people get the ex-div
date in Jan thisisn't true. Its was on 31/12.

[easymoney03] 02/1/2004 15:10

could test £1.50