WH Smith profit outlook falls short of hopes amid soft consumer demand

WH Smith PLC on Thursday announced plans to improve performance as it disclosed current trading has slowed and forecast profit in the current financial year will be below expectations.

The Swindon, England-based travel retailer reported a pretax loss from continuing operations of £107 million in the financial year that ended August 31 compared to a £2 million profit the year prior.

Headline pretax profit before non-underlying items declined to £76 million from £108 million, in line with guidance that it would be at the bottom of the £75 million and £90 million range provided in July.

Revenue increased 5.2% to £1.63 billion from £1.55 billion, with like-for-like growth of 2%. UK revenue rose 4%, North America by 9%, and Rest of the World & Other by 1%.

Free cash flow of £52 million was down from £63 million the year before, while headline net debt reduced to £325 million from £390 million.

Trading in the first 10 weeks of the current financial year is flat on a like-for-like basis, WH Smith said, reflecting continued softer consumer demand arising from global macroeconomic pressures and lower passenger volumes in North America.

This represents a slowdown from the 2% growth reported in the fourth quarter of the financial year just ended.

"The group continues to plan cautiously and currently expects headline group profit before tax and non-underlying items for the 12 months to August 2027 to be in line with current market expectations of £75 million to £85 million," WH Smith said.

At the £80 million mid-point of range, the result would be below what JPMorgan cited as current market consensus of £84 million.

Shares in WH Smith were down 7.3% at 396.00 pence each in London on Thursday morning.

For financial 2027, WH Smith expects revenue in the UK to be broadly flat versus the prior year, North America growth of low single digit versus the prior year and Rest of the World to decline 10% to 20% versus the prior year.

Headline net debt is expected to be around £320 million at the end of the financial year.

Executive Chair Leo Quinn said a review of the business in recent months found that "forced growth" delivered a "complex and siloed group structure without scalable benefits."

This resulted in "increased costs, too many loss-making stores, acquisitions not integrated effectively and high organisational complexity," he added.

But he stressed WH Smith is a business with "significant strengths: a strong and recognised brand, attractive market positions, prime locations and a dedicated team."

Improving fortunes will involve restructuring the cost base and delivering operational efficiencies, rationalising the store estate to exit loss-makers, and systems and back-office infrastructure to improve operational execution and reduce costs, he said.

The will be a focus on cash generation and disciplined capital allocation, he added.

"This is a complex transformation programme across the group, but I am confident that delivering it will transform WHSmith over the medium-term into a group capable of generating significant annual free cash flow and attractive returns," Quinn said.

No dividend was declared compared to a 6p payment last year.

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