View from City Road: Do It All needs a pick-me-up
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Your support makes all the difference.SIR Simon Hornby, chairman of WH Smith and an enthusiastic P G Wodehouse fan, is in the soup. He faces a problem that would have a panicky Bertie Wooster screaming for Jeeves and instructing him to eat plenty of brain-enhancing fish. His difficulty is the DIY price war between Smith's 50 per cent- owned Do It All chain and its rivals Texas Homecare and B&Q.
Do It All slumped to losses of pounds 10m in the year to 30 May. Analysts believe its losses will worsen in the current year, even if the worst of the price war is over. The housing market, the key to any recovery in DIY sales, desperately needs one of Jeeves's famous pick-me-ups. Do It All has made progress. It has regained market share lost in the first half. The new store format is producing healthy sales increases. Progress has been made on harmonising stock ordering. Plans to centralise distribution should yield cost savings.
But all this will count for little while rivals launch blanket discounts of up to 25 per cent. Smith is encouraged by the comparative promotional silence from competitors over the past four weeks. The next test comes this bank holiday weekend, a crucial period for DIY products.
Do It All tarnished an otherwise solid performance from Smith. There were like- for-like sales increases in virtually all its businesses. After stripping out the benefit of last year's pounds 149m rights issue, pre-tax profits were still slightly ahead.
Earnings per share rose 11.7 per cent to 31.5p, though this was mainly due to the absence of one-off losses this time and a surprisingly low tax charge. Earnings this year should reach 34.9p on a similarly low tax charge, putting the shares on a prospective multiple of less than 11 after yesterday's 15p rise in the share price to 376p, and yielding more than 5 per cent. That looks very cheap beside Kingfisher and Boots. But the monopolies investigation into newspaper wholesaling - and the threat of a similar look at compact disc prices - is likely to overhang the shares.
Wooster could always persuade Jeeves to cut short his August shrimping holiday in Herne Bay to come to the rescue. Sir Simon has no such guardian angel. Till there is firmer evidence of a ceasefire in the DIY war, the shares are no more than a hold.
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