WH Smith has issued a profit warning after a drop in shopper numbers at its US airport stores due to the Middle East conflict, prompting the retailer to raise £102m from investors. The company, which operates 1,200 outlets globally in airports, railway stations and hospitals, said it would use the funds to strengthen its balance sheet, pay down debt, invest in technology and shut unprofitable stores.
The retailer reported that revenues at its North American airport operations fell 2% year on year in the seven weeks to 6 June, following a decline in its UK airport business. As a result, WH Smith now expects pre-tax profits of between £75m and £90m for the current financial year, down from previous guidance of £90m to £105m.
The company said the profit warning reflects a decline in passenger numbers and weakening consumer demand across all divisions, as well as reduced brand marketing, increased promotional activity and inflation headwinds. WH Smith assumes no near-term improvement in consumer confidence and that jet fuel supplies can be maintained.
In the UK, revenues at WH Smith's airport stores were flat in the seven weeks to 6 June, while overall group revenues rose 1% year on year. The company raised £102m by issuing around 26m new shares. Shares fell by almost 20% at one stage to 394.8p, their lowest level since 2010, before closing down 16.2% at 412.6p.
WH Smith 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 North American resorts. The company is still dealing with the fallout from an accounting scandal at its North American arm, which overstated profits by up to £50m and led to the resignation of its chief executive. The Financial Reporting Council is investigating PwC's auditing of WH Smith's financial statements, while the Financial Conduct Authority is also probing the matter.
