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 retailer, which operates 1,200 outlets globally in airports, railway stations and hospitals, also announced plans to raise about £100m to strengthen its balance sheet, pay down debt, invest in technology and shut down unprofitable stores after “a downturn in trading conditions”.
WH Smith, which has already seen a fall in revenues in its UK airport operation due to the conflict in the Middle East, said that North America has now also been affected, with revenues at its airport operations falling 2% year on year in the seven weeks to 6 June.
As a result the company said that it expects pre-tax profits of between £75m and £90m this year, down from previous guidance of between £90m and £105m.
“Management’s expectations for the full financial year reflect the observed and anticipated decline in passenger numbers and weakening consumer demand across all divisions and a reduction in brand marketing, increased promotional activity and inflation headwinds across the group,” the company said. “The group assumes no near-term improvement in consumer confidence and that jet fuel supplies can be maintained.”
In the UK, WH Smith said revenues at its airport stores were flat year on year in the seven weeks to 6 June.
Across its entire business revenues rose 1% year on year across the period.
It is aiming to raise £100m by issuing approximately 26m new shares in the company.
Shares in WH Smith fell by 16% in early trading on Wednesday, to 413p, the lowest level since 2010.
The company will also book a £150m non-cash impairment charge this year after a review of its business and plans to shut some stores in Europe and in resorts in North America.
The WH Smith 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.”
WH Smith, whose share price has plunged more than 60% over the past year, is also still facing the fallout of an accounting scandal at its North American arm that saw profits over-stated by as much as £50m.
On Tuesday, the UK accounting watchdog, the Financial Reporting Council, said it is investigating PwC’s auditing of WH Smith’s financial statements for the year to 31 August 2024.
The scandal, which resulted in the resignation of chief executive Carl Cowling and led to £600m being wiped off WH Smith’s market value, is also being investigated by city watchdog the Financial Conduct Authority.
Richard Hunter, the head of markets at Interactive Investor, said: “Things are going from bad to worse at WH Smith and this statement is little more than a kitchen sink exercise.
“The capital raise comes at a time which will severely test investors’ patience and loyalty to the cause. Indeed, further investment into WH Smith will require something of a leap of faith.
“If the previous ‘annus horribilis’ for the group – where an overstated profit forecast led to a sharp decline in the share price, and with the chief executive unfortunately falling on his sword – seemed uncomfortable, matters have now taken a turn in what could be an existential time for the company.”
Last year, WH Smith sold its 480 high street stores to the Hobbycraft owner, Modella Capital, but retained its travel stores. Those high street outlets are now rebranded as TGJones.
