WH Smith set for sharp fall in profits amid cost and trading pressures

Susannah Streeter, chief investment strategist at Wealth Club, admits the war in the Middle East and increasingly cost-conscious travellers has hit WH Smith with a sharp decrease in profits expected.

She said: “WH Smith has been finding out that escaping the high street doesn’t mean escaping the pressures facing retailers.

“It sold off its town, city-centre and shopping-centre network to Modella Capital but retained what it hoped would be the cash cow for the business, its travel operation.

“The steady stream of passengers passing through airports, railway stations and other transport hubs had been a highly lucrative market, given so many are inclined to splash the cash with time to waste.

“For a while, this looked like a gift that kept on giving. It’s since discovered that there is no completely captive consumer, even at an airport.

“A combination of conflict erupting in the Middle East and increasingly cost-conscious travellers has dented sales.

“The war with Iran has disrupted air travel, with airlines cutting capacity on some routes and passenger numbers falling in some of WH Smith’s key markets.

“The conflict has also sent fuel and energy costs higher, adding to wider inflationary pressures. And even among those still travelling, there are signs that wallets are being kept a little more firmly closed.

“That’s particularly painful in North America, where like-for-like sales fell three per cent in the final quarter as passenger traffic weakened and demand waned.

“WH Smith now expects underlying pre-tax profit to come in at around £75 million, the bottom of its previous forecast range and sharply below the £108 million recorded last year.

“The group has already cut its profit outlook twice this year and raised around £100 million from investors, so this is another disappointment during an already highly difficult year.”