Waterstones Turns First Profit in Five Years; Opening More Stores

Waterstones, the bookselling chain with 275 stores in the U.K., Ireland and continental Europe, appears to have turned a corner: the company made its first profit in five years and plans to open stores "in the double digits," managing director James Daunt told the Bookseller.

In the year ended April 30, 2016, sales rose 4%, to £409.1 million (about $510.9 million), and Waterstones had a pre-tax profit of £9.9 million ($12.4 million) compared to a pre-tax loss of £4.5 million ($5.6 million) a year earlier.

Daunt attributed the profit in part to "better standards of bookselling" as well as a slowdown in the growth of e-book sales and an investment of £9 million ($11.2 million) during the year that made its stores "better, different, nicer." He also emphasized the importance of Waterstones booksellers and of handselling, and pointed out that booksellers' enthusiasm made the chain's 2016 Book of the Year, The Essex Serpent by Sarah Perry, which "would otherwise have achieved modest sales," become "a bestseller in the most competitive month of December. That is all about the service from bookselling. It is not about posters on the underground, but individual recommendations."

As for competition, Daunt said, "Amazon is our only real competitor. WH Smith does its own thing, independent bookshops do their own thing, just as we do our own thing. I think our business is less bestseller-led, unless we create one. It is more driven by a deep range of solid, decent books." Non-book products account for 12% of sales and likely will grow to 15% in the next three years.

Waterstones' next three-year plan is to "grow top line sales and generate more profit," Daunt said, adding that he wants to invest more in staff training and pay. "Certainly we need to give booksellers a pay rise," he said. "It is a virtuous circle, if you invest in staff, they want to stay with the company and worker harder, then the company does better. So we certainly want to be investing in them more going forward."

Since 2011, Waterstones has closed some unprofitable stores and plans to open more stores partly to "make up for the fact that the outlets it has closed have tended to be larger than the ones it has opened," the Bookseller wrote.

"We are scurrying around, looking for the right opportunities, but the property market remains quite tight" in the U.K., Daunt said. "We will be looking predominantly on the high street [downtowns], although we have done quite well in shopping centres recently."

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