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Waterstones turns a corner under Russian ownership
Britain’s biggest high street book chain has shrunk its operating loss by £13.2m.
Waterstones, Britain’s biggest high street book chain, has turned the corner under its new owner, Russian billionaire Alexander Mamut, despite the continued decline in book sales.
Accounts for Waterstones Booksellers Limited for the year to April 27 2013, the first full year of trading after being sold by HMV Group for £53.5m, show the bookseller made an operating loss before exceptional items of £12.2m.
This was a £13.2m improvement from the £25.4m operating loss reported in the previous period, despite sales falling 2.9pc to £398.5m.
The book chain’s total losses hit £23m, down from £42.9m in 2012, after accounting for £5.6m of exceptional items that included £2.2m of store closure costs and £1.4m restructuring costs.
“This improvement shows that we have sorted out the business,” says managing director James Daunt, the founder of Daunt Books, who was brought in by Mr Mamut to turn around the company at the time of the HMV deal in June 2011. “Waterstones has turned a corner,” he added. “The rate of decline has slowed substantially.”
Mr Daunt also pointed to the £29.5m of capital expenditure over the 2013 financial year, the majority of which was spent on a refurbishment programme for the 276 stores, designed to turn them into “places that encourage readers to expand [their] horizons”.
The investment in the stores was part-funded by working capital efficiency, with inventory reduced by £12.4m on the previous year end, according to the accounts.
The new Waterstones-branded Café W coffee shops, which have been introduced in 17 stores, are another driver of the company’s growth. “Book sales are far stronger in the Waterstones shops that have a coffee concession,” said Mr Daunt.
But the company’s partnership with Amazon to sell its Kindle e-reader tablets and e-books, introduced in May 2012, does not a make a “significant” contribution to Waterstones’ revenues, according to Mr Daunt. “Both sides are happy with the partnership, but it doesn’t materially change the business,” he said.
Despite the “extremely tough” environment, Mr Daunt said Waterstones had a “strong end to 2013” and a “respectable” Christmas, despite the weak sales experienced by rival retailers.
If the turnaround stays on track, he expects Waterstones to narrow the losses for the year to April 2014 at a similar rate to the previous year.