In a trading update ahead of its full-year results in November, WH Smith said it has been encouraged by improving trends in its performance as customer numbers at its travel sites and high street stores slowly recover from the Covid restrictions. However, the book and stationery retailer warned the trajectory of the recovery in travel remained uncertain and profits in the next financial year would be at the lower end of forecasts.
During the final eight weeks (to 28 August) of its current financial year, the group’s High Street unit generated 84% of revenue seen during the same period prior to the pandemic in 2019.
In its hard-hit travel division, WH Smith stated that its strategy has been to focus on customer conversion and increasing average transaction value. While UK passenger numbers remained “significantly down” versus 2019 levels, the retailer saw a gradual recovery in sales as restrictions eased throughout July and August, with revenue in the eight week period reaching 64% of the 2019 level compared to just 41% in the first half of the year.
This meant that overall group sales were 71% of what they were in the corresponding period two years ago.
WH Smith now expects the outcome for the full year to 31 August 2021 to be slightly ahead of expectations outlined on 8 July, with it stating that it remains confident that revenues will return to pre-Covid levels in the next two to three years.
The retailer concluded: “While there will be a return to good levels of profitability in the year ending August 2022, the trajectory of the recovery in travel remains uncertain. This combined with the previously announced accounting finance charges relating to the successful convertible bond issue on 29 April 2021, means that we currently anticipate the levels of profitability for the year ending August 2022 will be at the lower end of market expectations.”
NAM Implications:
- Passenger numbers drive travel retail.
- Given the restrictions (you name them!, including the next big crisis: climate change) the numbers will be down (permanently..?)
- In air travel alone, the 10% of business travellers supply 70% of the profit…
- …and given the changes in business travel caused by Zoom uptake…
- …travel retail is taking a long term hit.
- Best budget accordingly.
