WH Smith Profit Drop
WH Smith Expects Annual Profit to Fall to £75 Million Amid North American Struggles
Anonymous
Key Points
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WH Smith sold its UK high-street shops to private-equity firm Modella Capital last year as it refocused on travel and hospital locations.
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The company’s accounting problems have prompted investigations by both the UK Financial Conduct Authority and the accountancy watchdog into PwC’s audit of WH Smith, while an independent Deloitte review found shortcomings in the North American audit process.
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WH Smith opened six one-stop shops during the financial year ahead of peak trading, including refurbished outlets at Heathrow, Liverpool, Belfast International and East Midlands airports.
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In North America, fourth-quarter Air revenue rose 13% overall, but like-for-like sales fell 2%; the decline included a 1% drop in travel essentials and a 3% fall in InMotion, reflecting weaker passenger volumes and softer consumer demand.
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WH Smith said it will release its annual results on November 12.
WH Smith expects annual profit of about £75 million, the lowest end of its forecast range and down 31% from £108 million a year ago MarketScreener. The British travel retailer blamed heavy promotions, reduced marketing spending and inflation for the sharp decline, though stronger UK airport and hospital sales partly offset the damage.
North America, the company's largest weakness, saw like-for-like sales drop 3% as passenger volumes fell and shoppers spent less MarketScreener. The struggles come after WH Smith raised £103 million in new funding and faced investigations into accounting problems in its US division.
Promotions and Inflation Squeeze Profit Margins
WH Smith's push to run bigger sales promotions ate into profits this year MarketScreener. The company also cut marketing spending for major brands and dealt with inflation costs tied to global supply chain disruptions. These three factors combined to narrow profit margins significantly, even as total group revenue grew 5%.
UK Travel Hubs Deliver Strong Fourth Quarter
WH Smith's home market showed renewed strength in the final three months MarketScreener. The company reported like-for-like sales growth of 2% for the full year, with airports, hospitals and rail stations driving the gains. WH Smith opened six new one-stop shops during the year, including refurbished locations at Heathrow, Liverpool, Belfast International and East Midlands airports.
North America Weakness Forces Store Review
North America continues to drag on performance, with like-for-like sales falling 3% amid weaker passenger traffic and softer consumer spending MarketScreener. While Air division revenue rose 13% overall in the fourth quarter, like-for-like sales fell 2%, with travel essentials down 1% and the InMotion unit dropping 3%. The company is now reviewing the entire division and closing underperforming stores.
Accounting Probe and Recovery Plan Ahead
WH Smith remains under investigation for accounting failures in North America, with the UK Financial Conduct Authority and accountancy watchdog scrutinizing PwC's audit work MarketScreener. An independent Deloitte review uncovered shortcomings in the North American audit process. WH Smith will release full annual results on November 12.
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