W H Smith returns to profit and says pandemic recovery is 'well under way'

W H Smith has returned to profit and says recovery from the pandemic “is well under way”. 

Its interim results for the six months ended 28th February 2022 showed headline profit before tax and non-underlying items hit £14m, compared to a £19m loss in the same period in 2021, which was marked by the lockdown rules limiting retail and travel.  

Headline high street trading profit was up to £26m compared to £24m last year, with revenue holding steady at £270m. Total travel trading profit reached £10m compared to a loss of £28m last year with total revenue jumping 125% to £338m.

The UK side reported a headline profit of £3m compared to a loss of £19m last year, while in North America headline profits bounced to £8m compared to a loss of £3m the year before. The rest of the world reported a trading loss of £1m versus a loss of £6m in 2021.  

Travel is now performing particularly well, with total revenue in the eight-week period to 23rd April at 114% of 2019 levels. 

Group c.e.o. Carl Cowling said the group delivered a “good performance with a strong rebound in profitability” emphasising recovery across all of the group’s travel markets “despite the impact of the Omicron variant in quarter two”. 

He said the retailer is in a “strong position to capture growth as the recovery continues” and revealed the retailer has won 74 travel stores since the start of the financial year, including a “significant” tender win in Spain. It has also opened 28 new technology stores in the UK under its InMotion brand, as well as opening and winning a further 11 InMotion stores across six countries outside the US and the UK with “significant potential” to grow the brand globally. 

"Looking ahead, we continue to invest in the business where we see attractive growth opportunities and have positioned the group well to benefit from the return of passenger numbers,” Cowling said. 

“We have improved the scale and footprint of the business and are operationally stronger than before the pandemic. While there are some uncertainties in the broader global economy, the group is well positioned to capitalise on the ongoing recovery in our key markets and take advantage of the many opportunities ahead." 

The report said it is “managing” the impact of current inflationary pressures due to its “low ticket-value categories and strong supplier relationships" and said the further relaxing of travel restrictions leaves the retailer “well placed for the ongoing travel recovery and the key summer trading period”. 

However it did note the shift in consumer behaviour since the pandemic has seen footfall on the UK high street down approximately 20% on 2019 levels, with internet retailing “growing”. The retailer said it has responded by including more working from home ranges and tech accessories as well as making “best use of space” in its “well-located portfolio” such as the recent trial with Deliveroo which sees 10 stores deliver products direct to customers’ doors.  

The retailer revealed it has also “actively hedged” its energy costs for many years, with stores currently hedged to August 2023. It is also keeping leases short and flexible and said around 450 leases are due for renewal in the next three years, including 160 where it is holding over and in negotiation with landlords.  

As of 28th February 2022, the high street business operated from 537 W H Smith stores compared to 544 in 2021.