WH Smith has lowed its profits outlook for the remainder of the year due to the impact of the Iran war, and has announced plans to raise capital through new shares.
In an update to shareholders this morning, WH Smith noted declining air passenger numbers impacting on the business, which recently doubled down on airport retail and backed away from the high street.
Having previously issued guidance forecasting full-year profits of £90million to £105million, WH Smith has now revised that prediction downwards to £75million to £90million.
in a statement, the firm said: "Given the ongoing uncertainty from the Middle East conflict and pressures on gross margins, including the recent deterioration in the North America division, the Group expects to deliver FY26 Headline Group profit before tax and non-underlying items of £75million - £90million.
"Management's expectations for the full financial year reflect the observed and anticipated decline in passenger numbers and weakening consumer demand across all divisions and 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. Consistent with prior years, the Group's trading profit is heavily weighted to the final quarter of the financial year.
"North America planning assumptions for FY26 revenue growth of 4% - 6% and Headline trading profit margin of c.5%. All other divisional trading assumptions are unchanged.
"As a result of the North America InMotion review, store exit programme and ROW restructuring, the Group anticipates a significant non-underlying non-cash impairment charge of up to £150m for the full year relating to goodwill and store impairments."
The Times reports WH Smith plans to place up to 26 million shares with institutional and retail shareholders, representing approximately 20% of the company’s existing share capital.
It comes as the retailer reported that like-for-like revenue across the group rose 2% in the 14 weeks to June 6.
However, the past seven weeks have seen like-for-like sales in its key US businesses in airports and casinos fall 4% and 11% respectively.
Leo Quinn, Executive Chair, WHSmith, commented: "Early in April, we launched a far-reaching self-help programme across WHSmith. Our goal is to greatly strengthen the Group's operations while driving more effective implementation of value creation.
"The business has a strong core and operates in attractive markets with ample scope for profit expansion, particularly in North America. However, we need much greater capital discipline and a laser focus on returns. In recent years, the outcomes from certain acquired businesses and contract obligations have been very disappointing. Our priorities are to build an efficient and effective foundation for WHSmith and use this to drive a growth strategy managed for profitability.
"In particular, 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. While we make meaningful progress in these areas, we must continue to invest in our core business to drive more productivity. Our underlying processes and systems need upgrading to provide the data for stronger management of risk, working capital and speed of response. We are hiring the right people to deliver these changes.
"The impact of these actions will both require investment and result in a substantial non cash write off; but the returns to be had are clear.
"There is no doubt that current economic uncertainty and its effect on consumer appetite for spending has created headwinds. In this environment, sorting legacy issues while investing in the core model requires the financial flexibility of a stronger balance sheet in lock-step with self-help. This placing is a prudent and proactive step to accelerate our transformation of what is, at heart, a good business with some great people and clear opportunity for profitable growth.
"The consequent reduction in leverage nearer to our stated ambition of leverage below 2x will enable us to take the right actions at pace and strengthen the Group's platform for future profit growth, all with the intention of delivering significant value upside."
FSTE100
The UK's flagship share index, the FTSE 100, was down 86 points at 10,243 shortly after opening this morning.
Brent crude oil futures were up 0.39%, sitting at $91.81 a barrel this morning.
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