Outsourcing helps WHSmith save £18m

High street retailer WHSmith says the successful outsourcing of its IT systems has helped to achieve £18m in cost savings in its latest financial year.

The company saved £3m more than it had hoped for this year, and is looking to achieve similar savings next year.

The figures exceed plans set out by group chief executive Kate Swann a year ago to deliver £30m in cuts to the business over three years.

‘We saved £18m from a number of areas, including IT, for the financial year 2004 to 2005, which was £3m more than planned,’ a spokeswoman for WHSmith told Computing.

‘We outsourced our head office IT to Fujitsu, which saved us a couple of million pounds. Our Retek distribution technology environment was outsourced to Accenture, and the maintenance and support of the IT in our stores went to BT Expedite in March,’ (Computing, 16 March).

WHSmith disclosed the savings achieved across its retail business in its preliminary financial results for the year ending 31 August, published last week.

Pre-tax profits increased despite a slight drop in sales.

The results stated: ‘We have identified a further £18m of cost savings in support areas such as shared information systems, logistics and store efficiencies.’

The spokeswoman said: ‘Some of those savings will come from further efficiencies in IT and logistics.’

Nick Gladding, senior analyst at retail researcher Verdict, believes that the efficiencies and the rationalisation of the IT function were major contributors to the retailer’s healthier profits, particularly as sales fell by one per cent, to £2.5bn.

‘WHSmith’s priority at the moment is profit, so these cost reductions aimed at cutting its outgoings will improve profitability,’ he said.

‘The savings it has already identified for next year look likely to come from head office technology, logistics – where it says it is closing some of its depots – and restructuring its workforce.’