WH Smith on rack

THREE of the senior management at WH Smith, the high-street newsagent, bookseller and stationer, plan to tour the City this month in an effort to placate institutional investors angered by the group's recent profits warning.

Sir Malcolm Field, the group chief executive, said on May 19 that the retail division's sales had fallen 1.3 per cent and operating profits 18 per cent in the 11 months to the end of April. Consequently, WH Smith Retail's profits were expected to fall from pounds 82m to pounds 68m for the full year.

Sir Malcolm added: "The sector has been pretty flat. People are not spending as much in our categories." WH Smith's shares fell 65p to 351p on the day. They are now 343p.

In response to stock market rumours that institutions were threatening to call for the heads of Sir Malcolm and possibly the chairman, Jeremy Hardie, the company has disclosed that it is extending its "open" season for discussing its trading until the end of this month.

During that time, Sir Malcolm, finance director John Napier and head of corporate affairs Dr Kevin Hawkins plan to meet the group's 12 biggest shareholders.

Dr Hawkins said: "We are in the process of arranging one-to-one meetings to explain the situation, what we are doing to put things right and to answer any questions they may have."

WH Smith's shares are widely held by institutions, but the leading investors include Prudential Corporation, Mercury Asset Management, Baring Investment Management and Schroders.

Dr Hawkins added that, in his view, the rumour about big investors calling for boardroom resignations was "broker-inspired rather than institution- inspired".

"Clearly, we know that a lot of our institutional shareholders will be disappointed, but this sort of talk is a bit of a backwash from Kingfisher," he said.

In January, Kingfisher, the Woolworths, Comet and B&Q retail group, issued a profits warning and sacked its chief executive and finance director. Other changes in senior management followed.

WH Smith has been the subject of gloomy predictions by analysts for several months, led by Tony Shiret at BZW. Their case is that an increasing amount of WH Smith's business is being stolen by supermarkets, which are stocking newspapers, magazines, books and stationery alongside the baked beans, milk and bread. This has been enough to deny WH Smith the extra sales that make the profit after costs have been covered.

Under the banner Project Enliven, Sir Malcolm intends to redesign Smith's entire 500-branch chain to make the shops more colourful and exciting.

But institutions have already been putting a question mark over WH Smith's management, because of the so-far poor decision to persevere with do-it- yourself through the Do It All joint venture with Boots.