WH Smith has issued a profit warning after shopper numbers at its stores in US airports fell as a result of the war in the Middle East. The chain, which has branches in Birmingham, is set to raise £100m to address the downturn.
Impact of the Iran War
The retailer operates 1,200 outlets globally in airports, railway stations, and hospitals. It has announced plans to raise approximately £100m after a downturn in trading conditions. The company stated that management's expectations for the full financial year reflect the observed and anticipated decline in passenger numbers and weakening consumer demand across all divisions. Additionally, there has been a reduction in brand marketing, increased promotional activity, and inflation headwinds across the group.
Profit Forecasts Revised Downward
In a trading update for the 14 weeks to 6 June, the Swindon-headquartered group said it now expects headline annual profits to be in the region of £75m to £90m. In April, it was forecasting between £90m and £105m, against previous estimates of £100m to £115m. The group assumes no near-term improvement in consumer confidence and that jet fuel supplies can be maintained.
Self-Help Programme Announced
Executive chair Leo Quinn said the company is embarking on a self-help programme to strengthen the group's operations. We are now taking action to sell, exit, or renegotiate loss-making or low-return situations and, where appropriate, we are replacing directly run operations with franchises in sub-scale markets, he said. While we make meaningful progress in these areas, we must continue to invest in our core business to drive more productivity. There is no doubt that current economic uncertainty and its effect on consumer appetite for spending has created headwinds.
Focus on Travel Retail
WH Smith, which has been trading since 1792, offloaded its 480 UK high street outlets to Hobbycraft owner Modella Capital in March last year. This move was part of a bid to focus mainly on airport and railway station stores. The profit warning underscores the challenges faced by travel retailers amid geopolitical tensions and economic uncertainty.
