10th Jun 2026 09:16
(Alliance News) - WH Smith PLC on Wednesday said it will raise funds to bolster its finances, as it lowered full-year profit guidance, once again, amid a downturn in trading.
The Swindon, England-based travel retailer now expects to deliver headline pretax profit before non-underlying items of between GBP75 million and GBP90 million for the financial year ending August 31, down from GBP108 million in the year prior.
It is the second outlook cut in three months. In April, WH Smith reduced guidance to between GBP90 million and GBP105 million from GBP100 million and GBP115 million previously.
In response, shares in WH Smith plunged 18% to 404.53 pence each in London on Wednesday morning and have fallen 62% in the last year.
Last August, the firm was rocked after disclosing an overstatement of around GBP30 million of expected headline trading profit in North America. This led to the departure of chief executive Carl Cowling in November.
On Wednesday, WH Smith said the latest guidance cut reflected the ongoing uncertainty from the Middle East conflict and pressures on gross margins, including the recent deterioration in the North America division.
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, it said.
"The group assumes no near-term improvement in consumer confidence and that jet fuel supplies can be maintained," it adds.
Revenue in the 14 weeks to June 6 rose 5% on a constant currency basis, with like-for-like revenue up 2%. However, LFL growth slowed to 1% in last 7 weeks of the period.
UK sales grew 5% at constant currency for the 14 weeks, or 2% LFL, with growth picking up to 4% LFL in the last 7 weeks of the period.
North America sales rose 10% at constant currency, but declined 1% LFL in the 14 weeks, with the dip picking up speed to 4% in the last 7 weeks.
This reflected lower passenger numbers following recent air fare inflation and a reduction in airline capacity linked to the Middle East conflict, which drove lower store footfall and in addition softer consumer demand led to lower spend per passenger growth.
As a result of a softening in consumer demand, WH Smith said further promotional activity "has been and will be required", whilst brand marketing investment is reducing and inflation headwinds continue, resulting in gross margin pressure.
North America planning assumptions are for full-year revenue growth of 4% to 6% and headline trading profit margin of 5%. All other divisional trading assumptions are unchanged.
Executive Chair Leo Quinn said WH Smith is acting to "sell, exit or renegotiate loss-making or low-return situations" and replace directly-run operations with franchises in "sub-scale" markets.
"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," he added.
WH Smith anticipates a "significant" non-underlying non-cash impairment charge of up to GBP150 million for the financial year, relating to goodwill and store impairments.
To strengthen its financial position, WH Smith announced a capital raise, including a placing of up to around 26 million new shares, representing 20% of share capital.
At Wednesday's share price, the placing would raise around GBP104 million. The firm has a market value of GBP507.6 million.
In addition, there will be a subscription by certain directors and a retail offer.
This is intended to deliver a strengthened balance sheet to "position the group to capitalise on attractive growth opportunities across its key markets."
The placing will be through an accelerated bookbuild and includes both existing shareholders and new institutional investors.
Barclays Bank PLC, Goldman Sachs International and JP Morgan Securities PLC, are acting as joint global coordinators and joint bookrunners in connection with the placing. Merril Lynch International is acting as financial adviser.
As part of the placing, Causeway Capital Management LLC, which manages accounts that in aggregate represent the company's largest shareholding, intends to participate in the capital raise pro-rata to their existing shareholding.
WH Smith said it believes the fund raise is in the "best interests of shareholders and that raising equity is a prudent and proactive step which will "strengthen the balance sheet", enable continued execution of its "growth and transformation" agenda, provide greater confidence around leverage and reduce reliance on debt funding.
The fund raise is expected to reduce leverage from the current higher than targeted leverage levels to around 2 times by the end of the 2026 financial year.
Executive Chair Quinn said: "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."
By Jeremy Cutler, Alliance News reporter
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