W H Smith reports £116m loss but expects return to profit in 2022

W H Smith reported a group loss before tax of £116m for the year to end August 2021, although the retailer said it expected to return to “meaningful profit” in 2022 with a return to pre-pandemic levels.

Preliminary full-year results released on 11th November showed total group revenue was down 13% to £886m from £1bn the previous year, which included six months before the coronavirus hit. The headline group loss from trading operations was £20m from a loss of £43m the previous year. The chain’s £116m loss before tax was a reduction on the £280m figure it reported in 2020.

W H Smith said the new financial year had seen a good start. “Subject to uncertainties in our markets, which continue to be impacted by government actions, we are optimistic that we will be able to achieve 2019 sales levels in the current financial year,” its report stated.

The Travel business reported a headline trading loss of £39m, compared to £33m in 2020. Total revenue was £401m, down 27% on the previous year. The UK side reported a £32m headline trading loss compared to a £1m loss in 2020, with revenues down from £344m to £195m. This was attributed to a “significant decline in passenger numbers as a result of government-imposed travel restrictions” throughout the financial year. Compared to 2019, revenue in air was at 17% of prior levels while rail was at 32%. 

In North America, however, there was a good recovery with Travel stores reporting a headline trading profit of £6m, bouncing back from a £18m loss the year before. Revenue soared to £166m from £116m.

The firm said there had also been improving trends in Travel over recent months, with total revenue at 84% of October 2019’s levels. It plans a further 100 stores over the next three years, including 58 in North America. It also won its bid for a further 30 InMotion technology stores in UK airports.

In the High Street business, which includes its websites such as funkypigeon.com alongside UK stores, a “resilient” performance returned a headline trading profit of £19m on revenue of £485m, 4% higher than 2020 when a £10m loss was reported.

“The market has changed significantly during the pandemic, resulting in a shift in consumer behaviour over the past 18 months,” the report noted. “High street footfall is down 25% versus 2019 levels with internet retailing growing. The speed of this change has accelerated during the pandemic.”

Its response has included investing in new categories like working from home ranges and in its online businesses. It also closed 24 stores over the last 12 months “where leases had become uneconomic”. The firm has identified £45m of cost savings over the next three years with £35m planned for 2022, although it did not provide further details. 

Group c.e.o. Carl Cowling said: “The Group has delivered a good performance in the evolving trading environment. Thanks to the outstanding efforts of all our colleagues across the business, we have continued to adapt successfully to the changing environment and we are now in a strong position to grow our business as our markets continue to recover, returning to meaningful profitability in the current financial year. 

“In Travel UK, we are delighted to have won all 30 of the technology stores across UK airports. This is a significant win for the Group and we look forward to showcasing the very best of our US brand, InMotion, in these locations. These latest wins mean InMotion is now the largest technology retailer in travel locations in the world, and we see plenty more opportunity to grow the brand globally. 

“In addition to the InMotion stores in the UK, we have a very strong pipeline of new store openings with over 100 stores already won and due to open in Travel over the next three years - the majority of these in North America. We expect more space to become available as our markets recover and we are very well positioned to benefit from these opportunities. 

“Despite the challenges of the UK high street, more generally, our High Street business has delivered a resilient and profitable performance. Our online businesses have delivered strong growth in the year, including a record performance from funkypigeon.com. 

He added: “We are a financially strong and resilient group with significant opportunities to grow. While we continue to plan with caution, the group is well positioned to capitalise on the recovery in our key markets and take advantage of the many exciting opportunities ahead.” 

As of 31st October, W H Smith had 1,540 branches open around the world out of its 1,711 stores.