WH Smith has issued a profit warning as the Iran war continues to affect airport passenger numbers, prompting the company to raise over £100 million through a share issuance. The chain cited flight cancellations and reduced traveler volumes due to the Middle East conflict for the downturn in its airport stores.
Profit Forecast Slashed
The company now expects full-year profits between £75 million and £90 million, down from an earlier forecast of £100 million to £115 million. This marks the second profit downgrade this year for the retailer. Bosses attributed the revision to a drop in passenger numbers and flight cancellations triggered by the war in Iran.
Equity Raise and Director Participation
WH Smith issued 26 million new shares, roughly 20% of its existing share capital, to raise at least £100 million. Company directors, including executive chairman Leo Quinn and the finance chief, plan to contribute about £1.73 million to the fundraising.
Mr Quinn said: "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 Moves and Store Performance
The chairman also revealed that WH Smith has been taking steps to address loss-making situations, including "sell, exit or renegotiate loss-making or low-returning situations," such as replacing company-owned shops with franchises.
Revenues from UK airport shops dipped by 1% in the 14 weeks to June 6, compared like-for-like with the same period a year ago. However, hospital shops in the UK saw a 7% year-on-year revenue increase, and rail revenues rose by 2%, offsetting the airport decline and leading to 2% sales growth overall in the UK.
Analyst Commentary
Richard Hunter, head of markets at Interactive Investor, commented that WH Smith's capital raise "could prove to be the last roll of the dice for the company." He added: "The capital raise comes at a time which will severely test investors' patience and loyalty to the cause." Hunter noted that weaker consumer confidence has affected spend per passenger, a reduction in US flights has impacted airline capacity, and the Middle Eastern conflict has disrupted progress.
