February 9, 2015
Waterstones cuts its losses again
by Zeljka Marosevic
Good news for Waterstones: in the last financial year the retailer again cut its losses, according to The Bookseller. In the second consecutive year of reduced losses, the company’s loss after taxation in the year to April 2014 was £18.6m, down from £26m the year before. In the financial year of 2012, shortly after James Daunt took over as m.d of Waterstones, the company had losses of £42.9m.
Although the bookseller still saw losses of 18.6m, which is, after all, a substantial amount of money for a business to shed, we should take heart that things are looking a lot better than they were only two years earlier. Speaking to The Bookseller, Daunt noted:
They are not a comfortable set of accounts. It was a pretty difficult place Waterstones was in and it was only the prior year when saving it seemed rather improbable.The year we are looking at, we were making some progress but we still had some way to go.
What’s important here is that Daunt seems to be leading the company on a trajectory that should see it arriving at profitability. Daunt was optimistic about the coming year’s results:
We are approaching our end of year at the moment and the signs are really encouraging. There is a sense of optimism at Waterstones and although we are not at the end of April yet, the company is in a good position and I expect to be making a profit, give or take a couple of shops which might make a loss.
The financial year of 2014 saw Waterstones undergo a major restructure that involved the loss of 512 jobs at the company. This amounted to a 30% drop in staff numbers in stores, and 60-70% fewer people in head office, and evidently accounts for much of the reduction in losses. The retailer has also been reshuffling its stores to improve its figures: it closed nine shops, opened two new ones and moved three existing shops. This leaves it with a total of 276, 7 fewer than the previous year.
Daunt remains firm on his decision to cut so many jobs:
I would like to employ as many booksellers as possible, but we cannot afford it. I am unapologetic about booksellers being busy, because I think it creates energy and pace and an atmosphere in a bookshop and make for a more interesting job.
According to Daunt, a rosy future for the company will be when the retailer has an ebidta (earnings before interest, taxes, depreciation and amortization) of between 25m and 30m. He told The Bookseller:
That is an important yardstick for us where I would be expecting to say ‘we are in a secure business heading towards the £30m mark’ which is what we need to have without having to rely on [Russian billionaire and owner of Waterstones] Mr Mamut.
Daunt expects the company to reach 20m in the financial year ending 2015.
Zeljka Marosevic is the former managing director of Melville House UK.