In the hands of a skilled operator, the CTN still has a future

Hey presto! Only six months after acquiring the basket case that was Makro and already, under CEO Charles ‘Merlin’ Wilson’s spell, it’s reported this week a healthy 1% margin, while Booker as a whole has doubled cashflow, and returned £60m to shareholders via an uncharacteristically generous dividend, following yet another set of better-than-expected results.

“Even Charles Wilson may be powerless to stop the loss of trade to duty-avoided tobacco but don’t give up on the CTN yet”

Adam Leyland, Editor

But even Wilson is powerless to stop the loss of trade to duty-avoided tobacco - Booker sales were down 2.2% - and as JTI’s Jorge da Motta says, it’s astonishing that the Public Affairs Committee should accuse the tobacco trade of encouraging duty avoidance by oversupplying European markets.

A similar pall hangs over the newstrade, if for very different reasons. Smiths News reports that 29% of its profits now come from outside the newstrade, and is on track to increase to 50% by 2016. And it needs to because its newspaper sales dropped a further 2.7% while magazine sales were down 9.2%.

In the meantime, former partner WH Smith continues to defy logic, reporting strong profits (though sales are bombing) with a strategy focused on cost control to the detriment not only of its carpets (do something, Lord Harris) but the customer. However, this week, we report on a new initiative in which stores will feature a Budgens or Londis-branded area selling convenience food. Will WH Smith ultimately become a convenience-based grocery operator? Stranger things have happened - although equally, with expensive rents, too many stores, and high prices, it may just go bust, especially if it can’t reduce its reliance on tobacco and the newstrade.

That’s certainly been the strategy of McColl’s chairman and CEO James Lancaster, converting former CTNs to convenience stores to the point where, earlier this summer, he dropped the Martin’s fascia from the parent company name. But in his first-ever media interview, he argues that CTNs are “absolutely not dead” they just have to adapt. Either through conversion, or by introducing grocery or alcohol. This isn’t straightforward, but in the hands of a skilled operator, anything is possible. Now, Mr Wilson. About those cigarettes…