Strong sales of children’s books, teenage literature, and fiction have helped Waterstones to its first annual profit since the 2008 financial crisis, raising the potential of a stock market listing.
The bookseller made a £9.8m pretax profit in the year to 30 April 2016. The previous year is made a £4.5m loss.
Bought from HMV by the Russian billionaire Alexander Mamut in 2011 for £53m, Waterstones has shrugged off the rise of ebooks and Amazon to record a 4.3% increase in sales to £409m. Sales growth has continued in the past year, with a 4.7% rise over Christmas.
Mamut has spent about £100m on transforming Waterstones into a more efficient and modern retailer and, with sales growth and profits now on the rise, he is expected to cash out within the next few years.
James Daunt, the bookselling entrepreneur who was parachuted in almost six years ago to rescue Waterstones, said sales at established stores had grown at an even faster pace.
Children’s books such as the David Walliams titles and Jeff Kinney’s Wimpy Kid series, as well as teen fiction by the likes of Patrick Ness and Katherine Rundell have performed well. Daunt said young people were sharing news about what to read on social media.
“The growth of children’s books is an ongoing trend and an optimistic one for the future. People continue to read and teenagers continue to read and read more,” Daunt said. “Maybe the entertainment of a book becomes more obvious in a world of so much transitory social media.”
He added that sales of novels, which had been particularly affected by the rise of ebooks as fans of genre fiction such as crime novels fed their habit digitally, were also on the rise again.
“It’s not just the UK, almost all markets have seen similar growth,” Daunt said. “I don’t think readers are going off digital reading. It’s being used in a more indulgent way – when travelling – or if you are old and need a big font. But there are lots of studies which have found that reading a physical book is a very different experience. You remember it much more. It resides with you more than an ebook.”
Demand for Amazon’s Kindle e-reader has fallen so much that Daunt has removed them from most of Waterstones’ 280 stores.
While the rise of book sales and decline of ebooks has been important to Waterstones’ turnaround, Daunt said the business had also worked hard to differentiate itself from rivals such as Amazon and WHSmith.
He said book sales were partly being driven by Waterstones’ tactic of allowing staff to stock and push titles they believe would work in their store as well as helping readers discover new or less promoted authors.
Daunt added: “Book sales are back in growth again but we are also growing non-book sales, developing a cafe business and so the mix of what we sell is developing.” About 50 of the chain’s stores now have a Cafe W.