WH Smith is out- performing all expectations of them. Despite being in a declining market, where their customers are shopping at Amazon and downloading books.
They’ve just reported that they increased their net profit by 9% whilst their sales fell by 2%. That’s some going, so how did they do it?
By focusing on their gross margin and overheads:
- They have dropped low margin products and concentrate on the higher margin ones
- A focus on high margin locations such as airports and stations – sales and profits are up here.
- They have apparently turned cost cutting and efficiency into an “art form” getting the most they can out of their infrastructure.
- Investment in areas like low energy lighting and tablet computers to streamline stock control.
Of course as a long term strategy, it’s got its limitations. You can only cut costs so far and there are only so many efficiencies you can make before the business starts to creak.
I’m talking about Working Capital. It’s such a source of confusion for most people and yet a critical area of your business. I’ll be looking at what it means and how you can manage it practically in a small business.