Waterstones’ profits plunged almost 80% in the year to 29 April 2023, as it said problems with its new warehouse system cost the business more than £13 million.
Accounts filed with the Companies House show that profits for the book-selling chain tumbled from £50.6 million to £11.2 million.
Sales grew, by 13% to £452.5 million as it said “footfall and sales continue to recover post-pandemic, with encouraging growth in London”, and added that it had benefited from a resurgence in the popularity of physical bookstores. The figures were boosted by the acquisition of Blackwell’s.
However, warehouse problems led to higher costs, sending profits plunging. Waterstones implemented a new warehouse management system called Blue Yonder in the summer of 2022, but had difficulties distributing stock. Waterstones estimates that the warehouse issue cost the business £13.5 million in “direct and indirect” expenses.
At the time, a Watersones spokesperson said: “Waterstones last month upgraded the system that manages stock distribution from our warehouse to Blue Yonder technology. This is now operational, with stock flowing to our bookshops and customers.
“Over the implementation period, however, a backlog of orders was created which we are now processing as quickly as we can.”
After the fall in profits, the business undertook a “reverse stress test” to see how far sales would have to fall before it would need extra cash to survive. It said a 20% fall would put its ability to trade at risk, but such a fall was seen as “implausible”.
As of the end of the year, Waterstones had a total of 320 shops.
A Waterstones spokesperson said: “The accounts for Waterstones Booksellers Limited have been filed for the financial year which ran from 1st May 2022 to 30th April 2023.
“This covers the difficult period of the Blue Yonder implementation and subsequent significant impact on both stock availability and operating costs. The Blackwell’s acquisition in August 2022 is also within this year. As a result, whilst sales rose to £452.5m (2022: £399.8m), profit after taxation fell to £12.0m (2022: £42.1m).
“It is testament to the underlying strength of the companies, and the resilience and commitment of our teams, that the subsequent recovery of the business has been so strong, as demonstrated by the performance throughout the second half of 2023 and into 2024. Notwithstanding the disruption caused by the Blue Yonder implementation, 13 new shops were opened very successfully.
“The group had a good Christmas, with our shops well-stocked throughout and booksellers able to concentrate on customers once again. The performance of online sales was particularly strong. There was a good spread of publishing, with a number of standout bestsellers created by our booksellers, led by the notable success of Impossible Creatures and Murdle.
“We will build on this growth throughout 2024, as we continue to invest in our teams, our infrastructure and our shops, both within the existing estate and with further new bookshops in the pipeline.”
