WH Smith hopes for travel take-off

WH Smith (SMWH) has reported a £116m loss despite a profitable year of high street trading, as travel restrictions derailed plans to expand in airports and railway stations. However, the newsagent is confident it will return to "meaningful profit" next year as lockdown restrictions continue to ease. 

Despite the challenges facing UK town centres, WH Smith’s high street business achieved a £36m profit this year, after falling into a loss in 2020. Its high street arm contains personalised greeting cards business funkypigeon.com, which enjoyed a record annual performance, as well an online pen business. To help things along, the newsagent embarked on a series of cost-saving measures, shutting 24 stores, saving rent at lease renewals, and benefiting from the government’s business rates holiday. 

It was the group’s travel division that dragged down revenue and hit profits. In recent years, WH Smith has focused heavily on travel locations, hoping to combat the threat the internet poses to its high street shops, with their magazines, newspapers and books. As international travel seized up, however, so did sales: Travel UK reported an annual trading loss of £29m. North America fared a little better, with a £2m profit. 

But there are signs of hope. In 2018, WH Smith acquired US digital-accessories travel retailer InMotion and plans to open a host of stores in UK airports. It is also opening a new "blended essentials" shop at London’s Euston Station in December, and said it has been investing capex in strategically important projects, such as its refitted stores at London Heathrow Terminal 5 and stores at the new terminal at Manchester Airport. 

The company’s travel push has not been well timed. However, as the world opens up, it could prove a canny strategy, allaying fears that WH Smith is simply another tired high street brand. Hold. 

Last IC view:  Hold, 1,827p, 29 Apr 2021