Bookshop chain battles online competition

BOOKSHOP chain Ottakar's has shaken off competition from supermarkets and online rivals to deliver a 15.9% rise in pre-tax profits to £7.1m. The full-year results also revealed turnover was up 12.7% to £173.2m.

However, the profit figures came in below City expectations of £8.9m and the company also said the start of the year had proved 'challenging'. Like for like sales for the seven weeks to 19 March were down 1.6%.

The fall - partly due to comparisons with strong trading in early 2004 - comes after a disappointing Christmas season led to a profits warning in January. Ottakar's shares were down 5½p at 257p in early trading.

The company said that its expansion had pushed ahead in 2004. Ten new stores were added during the year to 29 January, taking the total to 131.

'We are confident that as Ottakar's approaches the £200m turnover milestone, there is significant opportunity for the company to extend its total floor space through the opening of new stores across a broad spectrum of town size,' said chairman Philip Dunne.

The chain plans to focus on opening smaller stores, which it expects to give a 'rapid payback'. The 24 Hammicks Bookshops it bought in April 2003 saw sales and profits margins rise. 'We are pleased with their progress,' the company said.

The dividend was increase 18% to 6.5p per share, reflecting a 'confidence to grow the business further and extract operating efficiencies' from its stores.

The company was set up by James Heneage, current managing director, and Philip Dunne in 1987 , opening three branches in Brighton (now closed), Banbury and Salisbury. Most of its expansion, however, has been since the company floated on the stock market in 1998. It now employs more than 1,200 staff and has a 5.5% share of the market.

However, it faces a tough challenge from the rise of internet retailers such as Amazon and supermarket chains such as Tesco, which discounts top-selling books. Online retailers' share of the market is expected to rise from 8% to around 12% in the next four years.