WH Smith expects full-year headline pre-tax profit of around £75m, putting earnings at the bottom of its previous forecast range despite stronger summer revenue across its travel-retail network.
The group said lower trading margins reflected increased promotional activity, reduced brand marketing and inflationary pressure. Central cost reductions and lower interest charges partly offset those headwinds.
Group revenue increased 5% across the year and 4% in the fourth quarter. The UK operation performed more strongly during the peak summer period, with total fourth-quarter revenue rising 7%.
The £75m profit expectation compares with £108m of headline pre-tax profit in the previous financial year. WH Smith had already reduced its guidance in June to £75m–£90m from £90m–£105m, leaving the latest forecast at the lower boundary of a range that had itself been cut.
The retailer raised £103m of equity in June as part of efforts to strengthen the balance sheet. Net debt is expected to be around £325m at the year end, with leverage of approximately two times.
The divergence between revenue growth and lower profit illustrates the importance of margin in travel retail. Airport and station locations benefit from concentrated passenger flows and relatively limited immediate competition, but operators also face premium rents, staffing requirements and complicated concession economics.
Inflation can therefore produce a difficult combination. Higher prices may lift headline revenue, while increases in wages, products and occupancy costs reduce the amount of each sale retained as profit. Promotional activity can support volumes but further compress margins.
WH Smith is undertaking a broader transformation after completing its strategic shift towards travel retail. The group has been rationalising its international portfolio, exiting weaker stores and considering franchise models in smaller markets while concentrating capital on locations expected to generate stronger returns.
During the year it exited Norway, agreed to leave Denmark and Sweden in early 2027 and plans to exit the Netherlands as leases expire. The objective is to reduce management attention and investment tied to operations where the group does not have sufficient scale.
The UK remains a stronger part of the portfolio. Refurbished airport sites and one-stop-shop formats are intended to capture a larger share of passenger spending by combining books and travel essentials with food, drinks, health, beauty and technology accessories.
North America has been more difficult. WH Smith has invested heavily in the region, but weaker consumer conditions and operational challenges have forced the group to reassess parts of the estate. Travel disruption creates an additional risk because the business is closely exposed to passenger volumes.
That dependence differentiates the group from conventional high-street retailers. A strong summer travel season can materially lift trading, while airline disruption, airport capacity constraints or geopolitical events can affect footfall with little warning.
Management is now putting greater emphasis on cash generation, working-capital improvements and selective capital expenditure. Those measures can stabilise the balance sheet, but rebuilding profit requires trading margins to improve alongside revenue.
The company will publish preliminary results in November. With profit now expected around £75m, attention will centre on whether portfolio exits and cost measures create a stronger starting point for the next year or whether inflation and softer international performance continue to limit the benefits of rising sales.
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