LONDON (Thomson Financial) - Kate Swann, chief executive of WH Smith PLC, the books and stationery retailer, has again warned investors not to expect the group to deliver underlying sales growth any time soon.

"In terms of sales growth, it's difficult to put a time on that, but I think it's unlikely to be in the short term ... It's unlikely that we'll return to sales growth for the next few years as we continue to manage that [product] mix," she told reporters after the retailer reported slightly better-than-expected interim results.

Her strategy is to focus on cost-cutting and improvements to gross margins, by shifting the mix of products, rather than driving top line sales.

She has re-balanced the mix of the business towards its core categories of stationery, books, newspapers and magazines, and away from entertainment products -- CDs, DVDs and computer games.

Entertainment products represented 25 pct of WH Smith's total sales when Swann joined the business, were down to 16 pct last October and will eventually be below 10 pct.

Swann, a former Argos executive, joined WH Smith in November 2003 and set out a three to five year programme the following summer to rebuild the retailer "as Britain's most popular bookseller, stationer and newsagent".

She has disposed of the group's travel businesses in the US and Far East, the publishing business, Hodder Headline, and last September de-merged the news distribution operation, now separately listed as Smiths News PLC.

However, some analysts argue that Swann does not have a long term growth strategy. A claim she disputes.

"We've also said if you look at our core categories of books, newspapers, magazines and stationery, they are long term growth categories, they've been growing at 2-3 pct," she said.

"If we are holding share in those categories, which we broadly are doing, then as consumer spending recovers we should grow at those sorts of levels."

At 8.31 am shares in WH Smith were up 4-1/4 pence at 436-1/4 pence.

james.davey@thomson.com jdd/ejp

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