Waterstones heading in 'right direction' after slashing losses

Waterstones is “moving in the right direction” but there is still “much more work to do”, the chain’s managing director James Daunt has said after the company significantly reduced its losses last year.

The bookseller’s annual financial accounts for the year to 25th April 2015 have been filed on Companies House, showing losses of £1.9m after tax, down from a loss of £18.5m in 2014.

Revenues at the chain retailer were up 1% year-on-year to £378.0m and the company also benefitted from £8.3m worth of capital investment from its owner Alexander Mamut, down from £20.9m a year earlier. The £378.0m figure represents sales for the UK-based bookshops and excludes the company's Irish and European stores. The results also show the chain made an operating profit of £4.3m in the year to April 2015, up from an operating loss of £12.2m in 2014. At the same time, 289 fewer people were employed by Waterstones in the year to April 2015 from the year before, down to 3,168 people.

Daunt told The Bookseller the accounts showed the company was “moving in the right direction” and he hoped to eradicate losses and achieve a profit in the current financial year. However, he cautioned there was still a quarter of the year to go before that date.

“It is moving in the right direction,” he said. “We have reduced losses by doing what we did the previous year, by becoming a better bookseller, and that is what has driven our sales.”

The company achieved a marginal growth in sales despite contending with a sharp plummet in the sale of Kindle e-readers “which came crashing down to zero,” he said. In books, academic titles were the hardest-hit area and in related product (RP), sales of calendars – once a “huge” part of the RP business – also fell sharply as more people use the calendars on their mobile phones and tablets instead.

However, sales of children’s books grew, fiction sales “stabilised” and the retailer saw an uplift in popular non-fiction titles. In RP, the company has also seen a rise in greeting card sales, boosted by the more effective buying of shops for their local markets. The company also became more efficient at cost control and managing stock, with much lower returns in the year the accounts relate to.

The Waterstones website re-launched in February 2015 and sales have since increased by 30% to date through that channel, albeit from a very low base, Daunt said. However, the company continues to have “no presence in e-books” and there were “no plans at all” to attempt to acquire an e-book platform, such as the deal to buy Tesco's Blinkbox Books, which fell through last year.

However, Daunt said: “One thing we are trying to do is open more shops.” In the year the accounts relate to, the company opened four shops but closed six, with the estate’s total coming in at 269 shops.

In terms of growing its international footprint, Daunt said: “I think we ought to open international shops. Our shops in Amsterdam and Brussels are very successful and they are very good at it. But the problem is at the moment, we are quite busy.”

On the subject of a possible move into the travel market, he added: “Travel is a huge opportunity for us but it is a very closed market. WH Smith has a lock on it. Our St Pancras shop has been fantastic for us and I would love to be in more travel locations, but a lot of outlets are in very long term contracts.”

Going forward, Waterstones will continue to grow book sales and manage margin and costs, Daunt said, with Café W becoming an increasingly important part of the business. In the year to April 2015, Cafe W's operated in 28 branches.

“We put a plan together when Waterstones was sold four years ago and we have done more or less what we expected to do, ” Daunt said. “If everything goes to plan, the figures will read black by April this year. Ebitda is black already."