Post office workers are to be consulted over strike action after Royal Mail confirmed yesterday that 70 main post offices are to be franchised to WH Smith. Unions said that the move could cost 3,000 jobs.

The Communication Workers Union is also threatening a boycott of WH Smith.

Royal Mail is slicing off another section of its shrinking Crown post office network - the main high street offices - leaving it with only 370. It is looking for another 15 to be franchised. WH Smith took on six other franchises last year.

Andy Furey, the assistant secretary at the Communication Workers Union, said: “This is a devastating blow for employees and customers alike and the sole reason for these plans is profit.”

Royal Mail said that it had now established a sustainable network. Alan Cook, the managing director of the Post Office, said: “Crucially, this partnership is about keeping major Post Office branches open in our towns and cities.”

Kate Swann, the chief executive of WH Smith, said: “A number of our stores have large amounts of space not working to maximum potential and the post office enhances the customer offer and fits well with our stationery offer.”

She said that she expected the post office franchises to be profitable once they were all running in 2008-09.

The post office deal was announced as WH Smith unveiled its half-year results. Ms Swann gave warning that underlying sales were likely to continue to fall for another two years at the books and stationery retailer yesterday as she revealed better-than-expected profits. Pre-tax profit before exceptional items rose 7 per cent to £59 million in the six months to February 28 despite a 6.5 per cent fall in sales to £721 million. The shares rose 2.5 per cent to 443p as the company raised its interim dividend 19 per cent on the back of a rise in free cash.

Ms Swann said that profits rose as the company avoided unprofitable discounting and reduced sales of less profitable entertainment goods in favour of books and stationery.

A 2.9 percentage point rise in gross margins and £8 million of cost savings helped to offset an 8 per cent slump in underlying sales at WH Smith’s high-street stores. Stores in airports and train stations saw underlying sales rise 4 per cent.

Ms Swann said that she expected a similar pattern to continue for another two years. “We don’t expect the high street to improve. In our core categories we see trading remaining pretty tough,” she said.

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