WH Smith shares have plummeted after the retailer dramatically cut its profit forecast, amid a prolonged downturn in global travel and a collapse in consumer confidence triggered by the Iran war. Shares in the Swindon-headquartered retailer tumbled 16 per cent at Wednesday's market open to 415p, leaving the stock down more than 35 per cent in the year to date.
The company now operates exclusively at airports and train stations, having offloaded its nearly 500 high-street outlets to private equity firm Modella Capital last year.
WH Smith had previously maintained it was making 'good progress' despite global headwinds, but announced on Wednesday that a recent 'deterioration' in its North American division has clouded its outlook.
The firm slashed its best-scenario forecast for profit before tax by £15m, cutting its range from between £90m and £105m to between £75m and £90m, as reported by City AM.
The retailer said its outlook reflects the 'decline in passenger numbers and weakening consumer demand across all divisions'. WH Smith is also set to suffer from 'a reduction in brand marketing, increased promotional activity and inflation headwinds,' it added.
The company's like-for-like revenue over the last 14 weeks rose by two per cent year on year, while sales across its airport businesses dipped by one per cent. Beyond the impact of reduced passenger numbers, weakening consumer confidence has left WH Smith grappling with lower spending per passenger, it confirmed.
WH Smith attributed the recent deterioration in its outlook to the 'deterioration' of its North American arm, where like-for-like revenue fell one per cent over the last 14 weeks, and four per cent over the last seven weeks. The retailer suggested that travel disruption is beginning to take its toll on consumers in North America, pointing to a two per cent decline in like-for-like sales at its airport stores across the region. This reflects 'reduced passenger numbers following recent air fare inflation and a reduction in airline capacity linked to the Middle East conflict'.
WH Smith said that higher airfares and reduced airport capacity have dampened store footfall and consumer demand, resulting in lower spend per passenger growth.
In a bid to shore up its balance sheet and reduce its debt burden, the retailer has launched a fresh capital raise. The firm has kicked off the process with the placing of 26m new shares, representing 20 per cent of its existing share capital. The retailer said it 'assumes no near-term improvement in consumer confidence and that jet fuel supplies can be maintained,' while noting that its trading profit tends to be heavily concentrated towards the latter part of the financial year.
Duncan Ferris, an investment writer at Freetrade, said WH Smith's disposal of its high street stores may have sharpened its focus, but had left the business 'vulnerable to travel sector pain'. 'Revenues are edging higher, but travel disruption and low consumer confidence have hit footfall and how much customers are willing to spend. This has translated to margin pressure and particular weakness in North America,' he said.
