Questor share tip: WH Smith falls overdone WH Smith 484.6p+12.9 Questor says BUY Sales have been on a downward trend for some time, but the group's self-help programme is designed to increase margins. Its travel businesses, which has stores in airports and railway stations, offers medium-term growth. The main piece of good news was that like-for-like sales at its high street operations fell 4pc. In the travel business total sales were up 1pc and like-for-like sales were down 3pc in the period. This means that WH Smith total group same-store sales were down 3pc in the first 15 weeks of the second half, compared with a 5pc fall in the first half of the year. Gross margins continued to grow. Of course, falling sales and increasing profits seem counterintuitive. However, profit growth has been achieved while like-for-like sales have been sliding in each year since 2004. Against a backdrop of a 29pc fall in sales since then, gross margins have risen by more than 15 percentage point as costs have slid by 8pc. Of course, this cannot go on forever. Future growth is likely to come from the travel division once there is an improvement in the global economy and travel increases substantially. Over the medium term, population and demographic trends are likely to lead to a significant increase in travel by air and rail and WH Smith must grab this opportunity. WH Smith shares were first tipped at 529½p on October 14 last year, and they are now trading 8pc below that level after their recent underperformance. This compares with a 1pc fall in the FTSE 100. Trading on an August 2012 multiple of just 8 times, falling to 7.3 next year, the shares are at an unwarranted discount to the wider retail sector. Even Home Retail Group, which is expected update the market at its troubled Argos operations next week is trading on a multiple of 13.8. The shares still look good value and Questor expects the dividend policy will continue to be progressive. With the shares yielding a prospective 5.4pc, rising to 6pc next year the shares are a buy.