WH Smith has issued a profit warning after a decline in shopper numbers at its US airport stores due to 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 approximately £100 million to strengthen its balance sheet, reduce debt, invest in technology, and close unprofitable stores following a downturn in trading conditions.
Impact of Middle East Conflict
The company had already experienced a drop in revenues at its UK airport operations as a result of the conflict. Now, North America has also been affected, with revenues at its airport operations falling 2% year-on-year in the seven weeks to June 6. In the UK, revenues at its airport stores were flat year-on-year over the same period. Across its entire business, revenues rose 1% year-on-year during this time.
Profit Warning and Financial Outlook
As a result, WH Smith expects pre-tax profits between £75 million and £90 million for the current financial year, down from its previous guidance of £90 million to £105 million. The company stated: "Management's expectations for the full financial year reflect the observed and anticipated decline in passenger numbers and weakening consumer demand across all divisions, as well as a reduction in brand marketing, increased promotional activity, and inflation headwinds across the group. The group assumes no near-term improvement in consumer confidence and that jet fuel supplies can be maintained."
Fundraising and Restructuring
WH Smith aims to raise £100 million by issuing approximately 26 million new shares. The company will also book a £150 million non-cash impairment charge this year after a review of its business and plans to close some stores in Europe and resorts in North America. Shares in WH Smith fell by 15% in early trading on Wednesday to 416p.
Self-Help Programme
Leo Quinn, the executive chair of WH Smith, said the company is embarking on a "self-help" programme to strengthen its 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."
Previous High Street Sale
Last year, WH Smith sold its 480 high street stores to Modella Capital, owner of Hobbycraft, but retained its travel stores. Those high street outlets have now been rebranded as TGJones.
