WH Smith shares plunge on £40m coronavirus profit warning
Shares in WH Smith fell more than 15 per cent this morning after the retailer warned that it could take a £40m profit hit due to the coronavirus outbreak.
The newsagent chain said it expects profit to be down between £30m to £40m in the financial year ending 31 August against previous expectations, while revenue is expected to take a £100m to £130m hit.
WH Smith said the outbreak has had an impact on both its travel and high street businesses, however flight cancellations and a drop in traveller numbers has dented sales in transport hubs. The retailer had previously made a strategic move to boost its railway station and airport stores while shifting away from the struggling UK high street.
This morning’s update does not take into effect the potential impact of a travel ban from Europe to the US. President Donald Trump last night announced that all travel from Europe, excluding the UK, to the US will be blocked for 30 days from tomorrow.
WH Smith said it had seen a “significant impact” on sales in the Asia Pacific region, which accounted for five per cent of its travel business, since February.
As the outbreak has spread across the world, WH Smith stores at airports across the UK, US, and Europe have been affected.
WH Smith said it expects its UK travel business revenue for the second half of the year to be down around 15 per cent compared to previous expectations, with airport revenue down 35 per cent in March and April.
Second half revenue in the US and the rest of the international business is expected to be around 20 per cent lower.
Neil Wilson, analyst at Markets.com, said: “You have to feel a little sorry for a company that has done a brilliant job of pivoting away from the struggling British high street to driving all its revenue and profit growth from airports and train stations.
“A rapid decline in footfall at travel sites because of the coronavirus is hitting revenues and will result in a material decline in profits this year.
“Trump’s 30-day European travel ban only makes things worse and threatens to make today’s estimates only partially reflective of the level of damage that could be done this year.”
In a statement this morning WH Smith said: “WH Smith is a resilient business with a strong balance sheet, substantial cash liquidity and strong cashflow.
“The Group has a strong management team in place and has consistently demonstrated that it can adapt and respond quickly to changing market conditions.”