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The news follows hard on the heels of yesterday's admission from the retailer that it was reviewing its media account, currently handled by Starcom Motive. The company has instructed Billetts to draw up a shortlist of agencies to pitch for the media account.

A WH Smith spokeswoman asserted that no decision had been made on the creative account, but a source close to AMV said: "The whole lot is up for grabs."

The review comes amid a poor trading performance and City concern regarding remuneration packages at the retailer. Sainsbury's recent decision to acquire TM Group, the parent company of the Martins and Forbuoys newsagents, is also expected to intensify competition in the sector.

Over Christmas, AMV introduced a new tone to WH Smith's festive advertising.

The agency tried to move the store away from its previous positioning as a provider of products to help consumers enjoy time off, and instead emphasised the chain's competitive pricing strategy.

WH Smith's most familiar ad campaigns by AMV starred the Only Fools and Horses actor Nicholas Lyndhurst, but these were dropped in 2001.

AMV won the account from Bartle Bogle Hegarty in 1996.

WH Smith's performance has consistently lacked lustre during the past decade. Earlier this month, it was forced to issue a profit warning after flat like-for-like sales over the crucial holiday period. This was the third profit warning in less than a year.

In a bid to revive its fortunes, Kate Swann, the former managing director of Argos, was drafted in as chief executive in November to replace Richard Handover, who then defied corporate best practice and took the role of WH Smith chairman.

Handover's appointment has further riled shareholders who were already smarting at the size and nature of Swann's "golden hello" package, which could top £3 million.

Swann has announced drastic plans to reduce the company's cost base and is midway through a review that will lead to redundancies among the 1,200 staff at its Swindon head office.

She has already axed three top executives from the group's retail division and disposed of the services of Beverley Hudson, the managing director of UK retail.