Retailer WH Smith has revealed more pressure on profits as it said results would be at the bottom of forecasts following a series of recent downgrades just months after a £100 million investor cash call.
The group said annual underlying pre-tax profits are now expected to drop to around £75 million for the year to August 31, down from the revised forecast given in June for between £75 million to £90 million.
It is set to mark a sharp fall on the £108 million in underlying profits reported for 2024-25.
WH Smith, which sold its UK high street shops to private equity firm Modella Capital last year, said the more downbeat outlook reflected “lower trading profit margins driven by increased promotional activity, a reduction in brand marketing and inflation headwinds”.
It follows a difficult past couple of years for the retailer, which is now focused on shops in travel locations and hospitals, with the group last year admitting it overstated profits for its North American business by as much as £50 million because of issues with its audit process.
In June, the UK’s accountancy watchdog said it had launched an investigation into PwC over its auditing of WH Smith in the wake of the damaging accounting saga in its US division.
Former chief executive Carl Cowling resigned in November last year after an independent report by Deloitte confirmed the accounting problems, finding a number of “shortcomings” in its US audit process.
WH Smith remains under investigation by the Financial Conduct Authority (FCA) over the accounting issue.
The firm raised £103 million in June through an equity raise to bolster its balance sheet and help drive investment plans.
Its full-year update showed like-for-like sales rose 2%, with UK revenue growth picking up to 4% in the final three months as it saw a recovery in airport sales as the peak summer season drove a bounce back in passengers.
UK airport sales lifted 2%, having fallen by 2% in the previous three months amid travel woes caused by the Iran war.
Hospital site sales jumped 8% and revenues from shops in rail stations lifted 4% in its final quarter.
It said it was seeing “good progress on the group’s transformation agenda”, with costs being reined in and some targeted investment in its travel essentials offering.
But annual same-store revenues remained flat across its North American business after a 3% drop in the final quarter.
Shares in the firm fell 2% in morning trading on Wednesday.
Chris Beauchamp, chief market analyst at IG, said: “A fresh cut to guidance today is a reflection of the tough times in global travel thanks to higher prices and the Iran war.
“Having bet the farm on North America, the recovery in the UK market is not the news investors had wanted and, as the global backdrop worsens, there is probably more bad news to come.”
