WH Smith cuts outlook and plans £100m share issue

WH Smith reduced its full-year headline pre-tax profit guidance to a range of £75 million to £90 million for the current fiscal year. The retailer linked the downgrade to weaker trading conditions across its business, with particular pressure at its travel locations.

Management said sales at airport stores have been affected by reduced passenger numbers and softer consumer demand. The impact has been tied to the fallout from the war in the Middle East, which has weighed on travel flows and spending at key hubs.

In the UK, revenues at airport stores were flat year on year in the seven weeks to 6 June. Across the whole group, revenues rose 1% over the same period, indicating only modest growth in recent trading.

Alongside the profit guidance cut, WH Smith announced plans for an equity capital raise targeting about £100 million. The company intends to issue approximately 26 million new ordinary shares, representing around 20% of its existing share capital.

The capital increase is intended to support the balance sheet as the group navigates a more challenging trading environment. Details of the structure of the raise were not expanded on in the raw reports, but the issuance will materially increase the company’s equity base.

The announcement of the planned share issue came as the company also outlined actions to respond to weaker demand, including a review of parts of its store estate in Europe and North America. Market reaction was swift, with the share price tumbling by double digits in early trading after the update.

WH Smith highlighted a combination of reduced travel activity and fragile consumer confidence as key headwinds. These factors have been particularly visible in its airport operations, which are an important contributor to group performance.

The company said current economic uncertainty and its effect on consumer appetite for spending have created additional challenges. In response, WH Smith is reviewing its operations and has signalled plans to close some underperforming stores in Europe and North America as part of its strategy to improve returns.

Alongside these operational measures, the group said it expects a significant non-cash impairment charge this year following its business review. This reflects updated assessments of the value of certain assets within the portfolio.

Separately from the trading and capital-raising update, the UK’s Financial Reporting Council has opened a formal investigation into the statutory audit of WH Smith’s consolidated financial statements for the year ended 31 August 2024. The audit under review was carried out by PricewaterhouseCoopers.

The investigation will examine PwC’s work on that set of accounts; no findings have yet been reported in the raw materials. PwC has stated it will cooperate with the regulator’s process.