WH Smith has cut its annual profit outlook for the second time this year and announced plans to raise equity, as the retailer cited a decline in passenger numbers at its travel hubs due to the Middle East conflict and weakening consumer demand.
Profit Forecast Reduced
The chain, which operates shops in airports, train stations, and hospitals, now expects to report a pre-tax profit of between £75 million and £90 million for the full year, down from its previous guidance of £90 million to £105 million. The company said the revised outlook reflects the observed and anticipated decline in passenger numbers and softer consumer spending across all divisions.
Revenue Performance
In the 14 weeks to June 6, revenues from UK airport shops fell by 1% on a like-for-like basis compared to the same period last year. The company attributed this partly to flight cancellations and disruptions related to the Middle East conflict. However, revenues from hospital shops increased by 7%, and rail revenues rose by 2%, leading to overall UK sales growth of 2%.
Equity Raise Plans
WH Smith also revealed plans to raise equity by issuing up to 26 million new shares, representing about 20% of its existing share capital. A separate offer for retail investors in the UK is also planned. The company hopes the raise will strengthen its balance sheet and support investment plans. Directors, including executive chairman Leo Quinn and the finance chief, intend to participate and contribute approximately £1.73 million.
Mr Quinn stated: "There is no doubt that current economic uncertainty and its effect on consumer appetite for spending has created headwinds." He described the equity raise as a "proactive step to accelerate our transformation of what is, at heart, a good business with some great people and clear opportunity for profitable growth."
Strategic Changes
The chairman also noted that WH Smith has been taking steps to "sell, exit or renegotiate loss-making or low-returning situations," including replacing company-owned shops with franchises. Last year, the company sold its high street chain to private equity firm Modella Capital, which rebranded it to TG Jones.
Richard Hunter, head of markets at Interactive Investor, commented that the capital raise "could prove to be the last roll of the dice for the company" and will test investors' patience and loyalty. He added that weaker consumer confidence, reduced flights in the US, and the Middle East conflict have disrupted the group's progress.
On Tuesday, the UK's accountancy watchdog launched an investigation into PwC over its auditing of WH Smith following an accounting saga in its US division. WH Smith admitted last year that it overstated profits for its North American business by as much as £50 million due to issues with its audit process.
