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News - 14 April 2006

Smart shops can increase profits while sales fall

There has been some good news on the high street in spite of the continuing downward trend in footfall. Some leading high street names are reporting increased profits even though sales are still sluggish.

Laura Ashley has surprised shareholders by turning in a profit last year in spite of a drop in sales. The improved profitability was all down to cost cutting and streamlining processes as well as repositioning some of its stores.

Laura Ashley reported a rise in pre-tax profits of 38% for the year ending in January while sales fell by 12%. This is a major turnaround for the company, which has been treading water for nine years.

Likewise WH Smiths has seen its pre-tax profits increase by 4% while its sales fell by 3% over the Last six months to February 2006.

Austin Reed has also turned a corner and is looking optimistically at 2006. The menswear retailer has achieved an increase in profits despite falling sales by controlling costs and reducing stock levels and net debt. The company is now beginning to see sales increase too with a rise of 11.9% for the early part of 2006.

BUSINESS FORUM COMMENT

There is a clear message here to retailers of all sizes. Profitability is not entirely dependent on footfall. In difficult trading periods it is important to have the right stock and a tight control on stock levels. It is also important to keep cost to a minimum by operating slick and efficient systems.

Electronic Point of Sale (EPoS) systems can help by giving better information to inform buying decisions but in the absence of this technology simply buying more judiciously can go a long way to keeping money in the till rather than sitting on the shelves.


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