Books, stationery and snacks seller WH Smith (SMWH) returned to profit in the first half ended 28 February 2022 and insists its recovery from the pandemic is ‘well underway’, with travel sales surging past pre-pandemic levels in recent weeks.
Yet despite a confident outlook from the international retailer, the shares reversed 4.3% to £14.46 on a down day for markets, with WH Smith also flagging the risks from some ‘uncertainties in the broader global economy’.
TRAVEL TURNAROUND
WH Smith posted pre-tax profits of £18 million for the six months to February, marking an impressive year-on-year turnaround from losses of £38 million as total group revenue ticked up 45% to £608 million.
‘The group has delivered a good performance with a strong rebound in profitability’, commented chief executive Carl Cowling.
‘We have seen a recovery across all our travel markets despite the impact of the omicron variant in Q2, and we are in a strong position to capture growth as the recovery continues.’
During the half the travel business, which is WH Smith’s growth engine, swung back into the black as revenue recovered to 82% of 2019’s pre-pandemic levels.
And in the recent eight weeks to 23 April 2022, WH Smith said travel revenue reached 114% of 2019’s level, demonstrating the strength of the recovery amid the further relaxing of travel restrictions.
‘Over the Easter holiday period, travel revenue was at 126% of 2019, giving us confidence for the key summer trading period,’ insisted the FTSE 250 retailer, which now plans to ramp up its travel stores with 125 new outlets in the pipeline including 63 in North America and 31 in Spain.
HIGH STREET RESILIENCE
Elsewhere, WH Smith highlighted ‘a consistently good performance’ from its structurally challenged high street business throughout the half with the important December trading period at 90% of 2019 levels.
Despite a 20% drop in high street footfall versus 2019 levels with internet retailing growing, the high street division delivered profits of £26 million, up from £24 million year-on-year, on flat revenue of £270 million.
WH Smith also assured investors the recent cyber security attack on its online greetings card and gift business Funky Pigeon is ‘not expected to have a material impact on the financial position’ of the company.
COPING WITH INFLATION
In the outlook statement, WH Smith stressed it is managing the impact of inflationary pressures thanks to its low ticket-value categories and strong supplier relationships.
The retailer insisted it remains ‘well placed for the ongoing travel recovery and the key summer trading period which gives the board confidence in the outlook for the remainder of the financial year.
‘Looking further ahead, while the broader global economy remains uncertain, the group is well positioned to capitalise on the ongoing recovery in our key markets and take advantage of the many new store opening opportunities ahead.’
