WH Smith profit grounded as flight cancellations take hold
WH Smith shares tumbled after the retailer adopted a more “cautious outlook” as the Iran war sparks a slowdown in international tourism.
The retailer’s share price fell by more than 15 per cent on Thursday’s open, to 532p, leaving the stock down more than 16 per cent in the year so far.
The stationer suffered a pre-tax loss of £25m in the six months to February, a sharp widening from £4m the year before, while revenue edged up slightly, by two per cent to £748m.
WH Smith’s profile took a drastic pivot last year when it sold its 480 high street locations, leaving only its stores in airports, train stations and hospitals.
The FTSE 250 firm said on Thursday: “In light of the uncertainty arising from the conflict in the Middle East, the Group is taking a more cautious outlook reflecting the impact on passenger numbers and weaker consumer confidence.
“Much will depend on the peak summer trading period and the Group assumes no immediate improvement in consumer confidence.”
WH Smith slashed its dividend as the retailer focuses on emergency measures to protect its margins and strengthen its balance sheet.
Iran war hits airport footfall
Tourism has suffered due to the Middle East conflict, as airlines initially grounded flights to protect passengers but now are facing the prospect of not being able to fly at all, as jet fuel shortages loom.
The UK’s leading airlines have called on the government to cut tax and regulation to better prepare the firms to deal with the impending fuel drought.
Assuming jet fuel supplies “can be maintained,” WH Smith said it expects its full-year profit before tax and underlying items to sit between £90m and £105m, down from last year’s £108m.
In the last six months, the retailer has seen flat revenue growth in the UK because of a “softening” in air travel caused by the Middle East conflict.
But the firm saw revenue grow in its North American and rest of the world markets, and said its new flagship stores in Heathrow Airport are a cause for optimism.
WH Smith hopes to forget accounting scandal
The retailer is still in recovery from an accounting blunder last year which caused the resignation of chief executive Carl Cowling.
Cowling resigned with immediate effect in November after a damning Deloitte report found weaknesses in the operations of the firm’s North American division.
The report came after WH Smith admitted to an accounting blunder which overstated its profit by around £30m.
The retailer sold its 480 high street stores to Modella Capital for £76m in June last year, with the offloaded locations being rebranded as TG Jones by their new owners.
Modella enlisted crisis advisors after many of its former WH Smith stores are said to be struggling, leaving around 80 locations at risk.