Shares in WH Smith fell more than 7% this morning after its profits took a hit from its struggling High Street division.
Group pre-tax profit fell from £43m to £32m in the six months to 29 February despite an 8% jump in revenue to £926m.
WH Smith’s Travel unit, which has shops in airports and train stations, continued to perform well, with revenue up 13% (+10% LFL) and trading profit increasing from £47m to £50m. It saw respective revenue uplifts of 15%, 13% and 24% in the UK, North America and the rest of the world as it continued to roll out new outlets.
However, revenues in its High Street business declined by 4% (-2% LFL), with profit down from £24m to £22m.
“The struggle on the high street is likely to persist, with our experts forecasting continued decreases in like-for-like sales,” said Third Bridge analyst Yanmei Tang.
WH Smith revealed that eight high street stores were closed over the period, taking the total number to 506. “As we grow travel, this division is becoming a smaller part of the overall group,” the company said.
“Our strategy for our high street business is clear and consistent – to manage our space to maximise returns and maintain a flexible cost structure – and [this] remains as relevant today as it has ever been.”
With the peak summer trading period for its travel business still to come, the retailer said it was on track to meet its full-year expectations after making a good start to the second half of its financial year.
CEO Carl Cowling said: “The group is in its strongest ever position as a global travel retailer. We have had a good first half and our businesses are well positioned for the peak summer trading period.
“Our travel divisions are trading well and I am particularly pleased with the outstanding performance from our UK travel business, which has seen a 19% increase in trading profit.
“We continue to make excellent progress in this division, growing our space and broadening our categories as we transition to a one-stop-shop for travel essentials.”
He concluded: “We are confident that 2024 will be another year of significant progress for the group.”
NAM Implications:
- Travel retail appears to be the future of WH Smith.
- With High Street presence and inevitable conclusion.
- Meaning High Street branches will continue to close until profitability is optimised.
- And if WH Smith don’t do it themselves…
- …it will be done for them, by market forces.
