* Year pretax pre-items profit 89 mln stg, forecast 87.4 mln
* Says will return 50 mln pounds to shareholders via buyback
* Final dividend 13.3 pence, up 18 percent
* Shares up 4.8 percent
(Adds detail, CEO, analyst comment, shares)
By James Davey
LONDON, Oct 14 (Reuters) - British newspapers, books and stationery retailer WH Smith forecast another rise in profits this year, saying the low average spend of its shoppers protected it from government austerity measures.
The 218-year-old retailer, which trades from 573 high street stores and a 516-outlet travel division with units at airports, train stations, hospitals, motorway service stations and workplaces, was relaxed about the impact on its business of next week's public sector spending review.
"Relative to other retailers our average transaction value is pretty low at around 5 pounds ($8) so we are less affected during a downturn or tougher economic times," Chief Executive Kate Swann told reporters.
"This year and last year our profits have consistently increased despite the fact the climate hasn't been as positive as we would have liked, and we would expect that to continue."
Swann was speaking after WH Smith beat forecasts with a 9 percent rise in 2009-10 profit, lifted its final dividend by 18 percent and said it would return up to another 50 million pounds to shareholders through a buyback programme.
A survey on Wednesday said consumer confidence fell in September to its lowest level in a year, while one on Tuesday said British retail sales growth halved in the same month, as uncertainty ahead of the government's Oct. 20 review made consumers nervous.
SUSTAINABLE GROWTH
Prior to Thursday's update, shares in WH Smith had increased by 10.4 percent over the last three months, broadly in line with the UK general retailers index.
The stock was up 4.8 percent at 477.3 pence at 0840 GMT, valuing the business at 718 million pounds, as investors welcomed the buyback news which would increase returns to shareholders, excluding dividends, to 175 million pounds since Swann became CEO in 2003.
"Management is turning the business into a sustainable growth story," said Seymour Pierce analyst Kate Calvert, who expects consensus profit forecasts for 2010-11 to rise by up to 4 percent.
WH Smith made a year to Aug. 31 underlying pretax profit of 89 million pounds, ahead of analysts' consensus forecast of 87 million pounds, according to a company poll, and 82 million pounds made in 2008-09.
The group said total sales fell 2 percent to 1.31 billion pounds, with sales at stores open more than a year down 4 percent and gross margin up 160 basis points.
Swann's strategy is based on cutting costs and improving gross margins by focusing on more profitable products, better sourcing and better control of markdowns, rather than driving top-line sales.
She has rebalanced WH Smith's mix of products towards core categories and away from entertainment products -- CDs, DVDs, computer games and consoles -- and is targeting a further 25 million pounds of cost savings over the next three years.
The final dividend is 13.3 pence, making 19.4 pence for the full year, up 16 percent.
($1=.6317 Pound)
(Editing by Paul Sandle and David Hulmes)