COVID-19 travel restrictions will significantly impact WH Smith in H2

Following today’s release of WH Smith H1 figures for 2019/20,

Zoe Mills, Retail Analyst at GlobalData, a leading data and analytics company, comments:

‘‘WH Smith has posted a decent set of results for H1 2019/20 but the period ended well before the UK lockdown and the outlook for H2 2019/20 is bleak. In April total revenue slumped 85% on the same period last year with travel revenue down 91% highlighting that it will not be able to rely on what is usually its strongest performing division for the remainder of the year. Its share price has fallen 65% since the beginning of 2020, reflecting its poor future outlook as governments have imposed quarantines and advised against all but essential travel, severely limiting airport and travel hub footfall, and hindering consumer confidence.

Over the reported period, its travel division continued to perform well but with like-for-like sales rising just 2%, much of total travel sales growth has come from its rapid expansion internationally and its recent acquisitions, InMotion and Marshall Retail Group. In the UK, WH Smith has temporarily closed most of its travel locations due to the significant drop in footfall as a result of travel bans and this fall in visitors is also a trend that it is also seeing in its international shops as many large airport stores around the world remain shut. H2 2019/20 will be a difficult storm to weather and WH Smith must continue to keep a close watch over its finances to mitigate the fall in revenues as much as possible through cost-saving measures.

WH Smith’s high street business continues to lag, with like-for-like revenue down 4%, an acceleration on last year’s decline of 1%. While the stationery specialist has highlighted that its high street stores have not performed as poorly as its travel locations with the onset of the COVID-19 pandemic, high street sales were down 74% in April despite 203 stores remaining open due to their essential post office services. Ultimately with such a big reliance on the travel industry, WH Smith will have a tough H2 2019/20 and while its online business has performed well so far, sales of books bought online were up 400% in April, it must continue to focus on its enhancing its digital channels even as its stores begin to open. It should improve its website functionality and style as the online channel will prove more resilient as shoppers opt to purchase from the safety of their homes even as lockdown measures are slowly lifted.”

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