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W H Smith issues £40m profit warning as coronavirus hits travel business
W H Smith has warned the impact of the coronavirus outbreak could cut its profit by up to £40m as the pandemic hits its Travel business.
The retailer said it expects profit to be down between £30m to £40m for the financial year ending 31st August, with revenue expected to take a £100m to £140m hit.
Since the outbreak began W H Smith says it has been monitoring its Travel and High Street businesses, with a “significant impact” in Asia Pacific, which accounts for around 5% of Travel’s revenue. In the last two weeks the Group has also seen a “material reduction” in passenger numbers at airports in the UK, US and Europe.
In a statement, W H Smith said: “For UK Travel, we expect revenue for the six months to be down approximately 15% on expectations which includes airports, our most affected channel, down 35% in March and April. On the same basis, including significant reductions in March and April, second half revenue in the US is expected to be approximately 20% lower than our expectations. The rest of our International business is also expected to be approximately 20% lower.”
The outbreak has not yet hit W H Smith’s High Street business but the firm “recognises that Covid-19 could result in reduced high-street footfall.”
The statement added: “W H 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. Over the longer term, the Board remains confident in the strategy and believes the Group is well positioned to benefit from the normalisation and growth of the global travel market.”
Shares in the retailer fell 15% this morning following the news.
Issuing its trading update for the first half of the year to 29th February 2020, Group total revenue was up 7% with like-for-like (LFL) revenue down 1%. Total revenue in Travel was up 19% with LFL revenue up 2%. In High Street, total revenue was down 5% with LFL revenue down 4%. As a result, the Group is confident that underlying profit before tax for the first half, which will be reported on 22nd April 2020, will be in line with market expectations.
