Not even the magic of Harry Potter could stave off the rainy weather across Britain this summer. But the latest instalment of the child wizard’s exploits, along with downpours that kept children from swings and slides, will help WH Smith to deliver full-year profits at the top end of expectations.

Shares in the books, stationery and music retailer rose 1.8 per cent to 394½p as analysts upgraded their profits forecasts for the year to August 31 to £64 million, up from an average expectation of £62 million.

WH Smith did not release detailed trading figures yesterday but said that its high street stores continued to deliver a “solid performance” focusing on gross margin gain and tight cost control. The retailer’s stores in airports and railway stations put on a “strong performance”.

Sources said the popularity of Harry Potter and the Deathly Hallows, the last in the children’s book series, had brought customers into stores and that wet weather had also encouraged families to buy DVDs, books and games to entertain their children.

Woolworths, Game Group and HMV Group have all reported strong trading figures in the past few months, helped by the poor weather and in marked contrast to last year when the British public was more interested in partying around the barbecue than shopping, during a period of Mediterranean weather combined with the football World Cup.

Analysts said that underlying sales at WH Smith were still likely to fall in the six months to August, partly as a result of WH Smith’s move away from selling CDs and DVDs.

However John Stevenson, an analyst at Shore Capital, said that he believed underlying sales in the second half would fall by about 2.5 per cent, about half the level previously expected.

He said in a note: “We remain concerned over the medium-term trading outlook for WH Smith Retail, which remains precarious to us once gross margin and cost-saving opportunities are exhausted.”

Since Kate Swann was appointed chief executive in 2003 WH Smith has built profits by cutting back on discounting and by introducing more profitable books and stationery ranges and cutting back on low-margin entertainment goods.

Ms Swann has said she expects underlying sales to continue to fall at the high street chain until next year, but this is being offset by increased margins and strong growth at the more successful travel stores.

WH Smith has developed new areas for expansion by moving into motorway service stations and standalone books and stationery stores.

The retailer also has strong cash-flow and analysts expect it to try to raise its dividend this year.

However, it is also thought to be considering a buyout of rival chain Borders, which has been put on the market by its American owners, and this could divert some of its cash pile.

WH Smith, which is competing against bidders thought to include 3i and the investment arm of the National Bank of Greece, is thought to be interested in only some of Borders’ stores. Analysts do not expect WH Smith to bid unless it can buy Borders cheaply. They say that some of Borders’ stores would sit uncomfortably in WH Smith’s portfolio.

WH Smith will announce its annual results on October 11.

Times Recommends

• Equitable Life halts £7bn sale on market turmoil
• Potential buyers emerge to save Woolworths staff
• Terrorist attacks close Bombay Stock Exchange