WH Smith Plc has again lowered its profit outlook for the current fiscal year, now expecting pre-tax profit to be in the range of £75 million to £90 million ($100 million to $120 million). This marks the second time in three months the company has adjusted its guidance downwards, from an initial range of £100 million to £115 million, then to £90 million to £105 million, and now to the lower figure. This revised forecast is primarily attributed to the ongoing conflict in the Middle East, which has significantly impacted air passenger numbers and consumer confidence, leading to weaker sales at its airport stores globally, especially in North America.
The conflict has led to disruptions in Middle East flight schedules and reduced airline capacity, causing lower footfall in airport stores. In North America, like-for-like revenue for the last seven weeks declined by 4%, with a 2% decrease in airport sales due to reduced passenger numbers and lower spend per passenger. The company also noted a softening in consumer demand, necessitating increased promotional activity and reduced brand marketing, which has put pressure on gross margins. Furthermore, the Resorts segment experienced an 11% decline in like-for-like revenue in the last seven weeks, mainly due to reduced visitor numbers in Las Vegas, prompting the closure of 14 uneconomic fashion stores, with plans to exit the remaining 12 by year-end.
In response to these challenges and to strengthen its financial position, WH Smith announced a plan to raise approximately £102 million ($136 million) through a share sale. This capital raise, involving up to 26 million new shares (20% of existing share capital), aims to bolster its balance sheet, reduce debt, and fund strategic investments. The company anticipates a significant non-underlying non-cash impairment charge of up to £150 million for the full year, related to goodwill and store impairments, particularly from a review of its North American InMotion stores and other restructuring efforts.
The company's shares plunged 18% following the announcement and have fallen 62% over the last year. Management's expectations for the full financial year assume no near-term improvement in consumer confidence and continued pressures on gross margins. The capital raise is expected to reduce the company's leverage to around 2 times by the end of the 2026 financial year, demonstrating a commitment to greater capital discipline and a focus on returns, particularly in the North American market.
