Waterstones to press ahead with store opening programme in 2018

Waterstones plans to press ahead with its programme of opening new premises in 2018, despite the business being up for sale.

Managing director James Daunt told The Bookseller he hoped to open around 12 new shops this year and continue the company’s refurbishment programme. If the planned number of new shops are realised and none close, it will bring the total in the estate to 294 (there were 274 in April 2017).

“Lots of shops aren’t as good as they should be,” Daunt said. “One of the benefits of a more trying retail environment is that the availability of shops goes up. High street banks shutting down also provides us with an opportunity [to occupy their vacated premises].”

The company opened five new outlets before Christmas. Three were smaller in size and named after their local area (The Deal Bookshop, The
Weybridge Bookshop and The Blackheath Bookshop), while new shops in St Neots and Epsom carry the Waterstones branding.

While the company aims to open new outlets, some established branches continue to face lease renewals or planning permission obstacles. The company’s Notting Hill Gate branch is in a precarious position because there is a process ongoing to approve planning permission to redevelop the site, Daunt said.

He is also mindful of the general economy and the fact that shopping centres are being hit by lower footfall. “The wider economy is always a concern and much depends on what happens with Brexit,” Daunt added. “If the country becomes poorer, it will impact on us. Footfall is down in shopping centres, which shows the chill winds of economic reality are beginning to bite, or that people are beginning to shop online. If there is uncertainty, people will spend less money in shops.”

Despite this he said the chain’s current place in the market was stable. “The excitements we have had over the past few years—not knowing to what level e-books and online sales will grow—have largely levelled out,” he said. “Our current place within the market is very stable. We deliver a really good service and have good shops in place. If the shops are good, sales go up; if they are not, sales go down.”

He was speaking after the company’s latest results were released through Companies House last week (19th January). They showed that sales totalled £403.8m in the 52 weeks to 29th April 2017, down 1.3% (from £409.1m). Pretax profit was up 80% to £18m (from £9.9m), and operating profit jumped 28% to £26.6m (from £20.8m), although profit after tax fell to £16.1m, an 8.5% fall from £17.6m a year earlier. The accounts include sales from its UK shops and outlets in Ireland, Holland and Belgium.

Daunt attributed the lower sales in the period to a handful of profitable shops he was forced to close after landlord negotiations, such as the Oxford Street West and Wimbledon branches. The jump in operating profit was achieved through more efficient running of the overall business, he said.

The accounts show capital investment in the business had grown from £9m in the previous year to £9.6m. The company will continue to invest around £9m annually in improvements, Daunt said, focusing on its online operation and further store refurbishments.

In October it was reported that Waterstones’ Russian owner Alexander Mamut had put the business up for sale with a price tag of £250m, with the deal being handled by corporate financier N M Rothschild.

While Daunt said earlier this week the sale process had resumed after a Christmas break, he dismissed the suggestion a deal was imminent. “Selling a business is a complicated process. The owner agrees to put the business up for sale, then there is a period of due diligence, where potential buyers assess whether Waterstones is what it appears to be. Then there has to be an agreement drawn up. That all takes quite a lot of time and we are in the relatively early stages of that whole process. But I hope it is done quickly.”

He told The Bookseller “the most logical” buyer of the business would be a private equity firm and the suggestion of Waterstones being sold “to a trade buyer” such as Amazon or W H Smith was “nonsense”. When asked if he was confident the business would find a buyer, Daunt said: “I would have thought so. We are looking at a solid set of accounts.” He added: “It’s no secret that it is for sale and it’s no secret that quite a few people are interested in it.”

He also expressed a desire to continue his seven-year stint at the helm of the business after it has been sold. “Obviously, I am here as long as Mamut wants me and as long as the new owner wants me,” he said.