The devasting impact of the coronavirus lockdown on the retail sector was highlighted today by WH Smith, which revealed that its total revenue had tumbled by 85% in April.
Worst hit was its Travel division where sales dropped 91% after a “significant” decline in passenger numbers due to the travel restrictions. The vast majority of its stores in airports and railway stations in the UK and overseas have been temporarily closed during the crisis.
The group’s High Street unit also suffered with revenues down 74% after all but 203 of its stores were closed.
WH Smith said it was working on plans for a phased reopening of stores across its international territories, UK travel channels and high street business.
The only good bit of news was that its online business had performed “strongly” with sales surging up 400%, driven by increased demand for books.
The trading update was issued alongside half-year results for the period to 29 February. These were mostly unaffected by the current crisis with total revenue up 7% to £747m and profit from trading operations increasing 1.1% to £93m.
Chief Executive Carl Cowling warned that inevitably the group’s performance in the second half will be “very different” having seen a significant impact from the coronavirus on its business since March.
He added: “We were fast to react to the situation and issued new equity via a placing, raising c.£162m on 6 April 2020. We also secured an additional £120m of bank funding.
“We are a resilient and versatile business and with the operational actions we have taken including managing costs and the new financing arrangements, we are in a strong position to navigate this time of uncertainty and are well-positioned to benefit in due course from the normalisation and growth of our key markets.”
However, with the travel market likely to be curtailed for some time, WH Smith is facing a prolonged period of weak demand in its key airport stores.
Russ Mould, investment director at AJ Bell, commented: “WH Smith has had the rug pulled out beneath its feet. Before coronavirus, it astonished the world by proving it was capable of maintaining a profitable operation despite operating in a struggling channel (the high street) and selling products in a declining market (newspapers and magazines).
“Coronavirus has now dramatically hurt WH Smith’s business, as illustrated by half-year results which show what could be its final period of the old glory days before life changed for everyone.”
NAM Implications:
- The Big Issue is whether a 400% increase in online is sufficient…
- …to compensate for long term damage to travel retail and newspaper sales.
- Your call…
- …but certainly worth a couple of extreme scenario ‘what ifs’ in your categories.
