Book shop's profit fear spells trouble Ground Floor Sheila O'Flanagan

Stories about bookshops don't tend to take up very many column inches in the business sections of the newspapers (unless they…

Stories about bookshops don't tend to take up very many column inches in the business sections of the newspapers (unless they're part of a story about the Harry Potter money-making phenomenon) but British chain WH Smith claimed its spot recently after issuing a profit warning on the first trading day of the year.

In fact, the statement by chief executive Ms Kate Swann said they were "by any standards, disappointing results reflecting tough conditions". This freaked out retail market analysts, all of whom are now wondering whether or not other stores have had a difficult end-year trading season.

I have a particular interest in WH Smith, not because I own any shares (just as well since they've fallen from 410p earlier last year to around 235p) but because they own the company that publishes my books.

At the time that WH Smith bought Hodder Headline, people in the industry were concerned that the chain would favour their books above anyone else's, although WH Smith assured them that it wouldn't be the case. The way things are going now they'll be happily selling anyone's books - apparently they plan to offload unwanted stock at giveaway prices. I'm hoping that my volumes aren't included in the knockdown bin, it's such a kick in the teeth to see yourself in the bargain basement!

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A bad Christmas season is a disaster for booksellers since 25 per cent of the entire year's sales often take place in December and 40 per cent of most booksellers' trade happens in the last quarter of the year. If a store has problems in that selling period, it's in deep trouble.

So it's not surprising that the head of the UK retail business, Ms Beverley Hodson, got the sack. It's been a bit of a roller-coaster time for Beverley, who was previously passed over for the post of chief executive but who managed to extract a £112,000 (€160,000) "loyalty" bonus for not getting the job. This was on top of a salary of £330,000 and at a time when the company was still reporting falling sales.

The reason, according to Smith's, was that when the appointment of new chief executive Ms Swann was announced, it was believed that she wouldn't arrive until this month, and they needed to make sure that Beverley stayed in place over the challenging Christmas period.

Um, right - that worked out then.

In the event, while Beverley presided over the disaster, Kate managed to leave her previous position as managing director at Argos in November. (Kate hops around a bit, she only joined them in January 2001. Before that she was the managing director of Homebase.)

I suppose, in the general scheme of things, £112,000 is neither here nor there for the retailer, but shelling out that sort of money unnecessarily will be enough to make shareholders shiver as they wonder about the bookstore's long-term future.

The demise of books and bookshops is predicted fairly regularly - the first threat generally comes from those who claim that technology will kill off the printed word and that, in the future, people will download books from the internet; the second from those who say that we have lost the art of reading anyway and that people are more likely to spend their money on CDs and video games than books.

WH Smith does, in fact, also sell CDs, as do many bookshops these days, since they are not unaware of consumers' differing tastes in entertainment but diversifying sales hasn't been enough to halt the cycle of disappointing results for the store.

The chain has been slated, too, for offering a range of discounts such as two for £20 (you could mix 'n match a book and CD if you liked); or three-for-two offers, which analysts now claim customers found "confusing".

I have to say that I'm a bit bemused by that myself. I love bundled book offers and am a regular three-for-two buyer. Actually, my favourite discount is the wonderfully named BOGOFF - which is, in fact, Buy One Get One Free (or "one for free" if you want to be pedantic).

Anyway, further fall out from the WH Smith profits warning includes the almost inevitable review of the business, which will undoubtedly mean the axe falling on other employees as well as Beverley Hodson.

Once again, it's a case of management getting it wrong but somehow ending up OK but the shop assistants being the ones to lose out.

The sad thing about that is that many of them really love books and don't just see them as another commodity. This is interesting because more and more bookshops - particularly in Britain and the US - are packing the front of the store with non-book items hoping to attract new customers.

A couple of months ago I stood in Borders in Canada surrounded by scented candles and jars of bubble bath and wondered where the books were. Upstairs, apparently. I believe in the idea of cross-selling, but most people go into bookshops to buy books not bubble bath.

According to some staff, the layout of many WH Smith shops is a disaster. The last time I was in Britain, an assistant told me that bottled water was the commodity the chain most wanted to sell as it had the highest markup. So now I'm competing with Evian for shelf-space!

Irish booksellers have also spoken of tough conditions recently. Even though a weaker pound has lowered book prices by an average of 13 per cent, there hasn't been a corresponding increase in sales. (Of course that's because we all bought them even at the higher price!)

They're not as frightened by competition from the supermarkets because they think it will help to grow the general market and they're not as obsessed with trying to lure in customers by pretending to be a chemist that happens to sell books too.

Though maybe there's a BOGOFF possibility with scented cubes for those who like to read them in the bath.