Magazines, books and snacks seller WH Smith (SMWH) was the biggest FTSE 250 faller on Wednesday, its shares cheapening 5% to £15.51 after the retailer warned it currently sees profits for the year to August 2022 coming in at the lower end of expectations.

WH Smith blamed uncertainty over the travel sector and accounting finance charges linked to a bond issue for the mild earnings alert, one issued on the first day of its new financial year, although the retailer also highlighted improving trends in its travel and high street businesses despite the lingering impact of Covid-19.


Figures for the eight weeks to 28 August 2021 show WH Smith is still operating on much-reduced sales across its travel arm, which includes sites in airports and train stations.

The growing number of people who have been vaccinated is positive for people’s willingness to travel and therefore WH Smith’s earnings opportunities, but the spread of the Delta variant and ongoing travel restrictions means the exact pace of the retailer’s earnings recovery remains uncertain.

Encouragingly, WH Smith expects the outcome for the year to August 2021 will be ‘slightly ahead’ of expectations the company outlined on 8 July 2021.

And despite today’s earnings downgrade, WH Smith says there will be a return to good levels of profitability in the year to August 2022 and remains confident that revenues will return to pre-Covid levels in the next two to three years.

‘Although the pace of recovery varies across our markets, we are financially strong and well placed to capitalise on the multiple growth opportunities in our key markets’, insisted the company.


Russ Mould, investment director at AJ Bell, commented: ‘Market forecasts should have already factored in the bond charges, which suggests some analysts may not be on the ball.

‘It seems that current market forecasts out to August 2022 might have been too optimistic about how much money it might earn. WH Smith’s travel outlets are fueled by both domestic and foreign travellers and so it is impossible to judge its earnings potential simply by looking at how many countries are on the UK’s green list.’

Mould added: ‘Under the circumstances, WH Smith still seems to be holding up quite well and in the bigger scheme of things, today’s profit setback is not a sign of a business in trouble.’


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Issue Date: 01 Sep 2021