WH Smith Issues Profit Warning and Plans to Raise £100m

The Profit Warning and Fundraising Plan

WH Smith has issued a profit warning after shopper numbers at its stores in US airports fell as a result of the war in the Middle East. The retailer, which operates 1,200 outlets globally in airports, railway stations and hospitals, also announced plans to raise about £100m to strengthen its balance sheet, pay down debt, invest in technology and shut down unprofitable stores after “a downturn in trading conditions”.

Impact of the Middle East Conflict

WH Smith, which has already seen a fall in revenues in its UK airport operation due to the conflict in the Middle East, said that North America has now also been affected, with revenues at its airport operations falling 2% year on year in the seven weeks to 6 June. In the UK, WH Smith said revenues at its airport stores were flat year on year in the seven weeks to 6 June. Across its entire business revenues rose 1% year on year across the period.

Financial Implications

As a result, the company said that it expects pre-tax profits of between £75m and £90m this year, down from previous guidance of between £90m and £105m. The company will also book a £150m non-cash impairment charge this year after a review of its business and plans to shut some stores in Europe and in resorts in North America.

The Fundraising and Future Plans

It is aiming to raise £100m by issuing approximately 26m new shares in the company. The WH Smith executive chair, Leo Quinn, said the company is embarking on a “self-help” programme to strengthen the group’s operations. “We are now taking action to sell, exit or renegotiate loss-making or low-return situations and, where appropriate, we are replacing directly run operations with franchises in sub-scale markets,” he said.