WH Smith today pointed to a strong online performance as it reported profitable high street operations and positioned itself for the reopening of travel. But group sales fell by 44% over the first half of its financial year and it reported a pre-tax loss.
The newspapers-to-stationery retailer today said it had extended online ranges and built customer numbers at its websites, including whsmith.co.uk and specialist pen website Cult Pens. Its stationery-focused Funkypigeon website had a “record performance” and is expected to deliver a profit in the current financial year. Investment in the Funkypigeon app has helped to improve conversion. It now plans further online investment.
WHSmith’s high street business reported a trading profit of £24m, down from £44m last time, on total revenue that was 14% down. Most of its stores have stayed open throughout lockdowns, since the retailer was classed as an essential retailer for its newsagent and Post Office services. Seasonal and work from home ranges were both popular during the half-year. The retailer said in November that it would close a total of 25 stores. Seven of those have closed and the remaining 18 are set to shut their doors in the current financial year. The retailer currently has 561 WHSmith high street shops, down from 575 a year earlier.
WHSmith group chief executive Carl Cowling says: “In a difficult retail environment our high street business has generated a resilient performance. At the same time, we are pleased that our online businesses, including funkypigeon.com have delivered a record performance.”
Travel shops, the largest part of WHSmith’s business, with 1,168 shops around the world, have continued to be hit by falling passenger numbers during the Covid-19 pandemic and restrictions. Its UK travel business today reported revenue of £79m in the first half of the year, down from £271m a year earlier. Some 745 shops were open and able to trade on February 28. In the last half-year, sales at its airport shops were 16% of the same period last year, and those at rail stations were 22%. However, hospital stores made 71% of their prior year takings. Currently 60% of shops in this division are open. The retailer now plans to open about 100 new travel stores over the next three years, including more than 60 in North America, where the domestic travel is expected to recover sooner.
Cowling says: “In travel while many of our stores have remained closed, it is a credit to the team that we have kept up the momentum, focusing on our plan to increase average transaction value and spend per passenger while continuing to win new business. As a result we are now operationally stronger than prior to the pandemic.”
The update came as WH Smith, a Top250 retailer in RXUK Top500 research, reported revenue of £420m in the six months to February 28, 44% down from revenue of £747m a year earlier. It reported a pre-tax loss of £17m before one-off costs. After one-off costs of £21m, largely related to the impact of Covid-19, bottom line pre-tax losses came in at £38m. That’s 160% down from a bottom-line pre-tax profit of £63m at the same time last year.
Commenting on today’s figures, Jonathan Rock, associate retail analyst at data and analytics company Global Data, says WHSmith’s decision to open more travel shops comes hours after Dixons Carphone yesterday said it would close its travel arm, as a result of the government’s decision to remove tax-free shopping concessions.
He says: “Holiday-starved consumers and rapid vaccine progress in the UK and USA in particular support this push towards travel retail, but reliance on a smooth recovery from the unpredictable pandemic is not without risk. It should be pointed out though, that WH Smith’s travel offer is not reliant on tax-free pricing in the way that Dixons Travel was. WH Smith said it performed ahead of its expectations for the period and will finance this expansion with a £325m convertible bond, of which £50m is assigned to fund these store openings and the remainder will help refinance the £400m in loans from its previous acquisitions.”
Rock says WHSmith would do well to expand its omnichannel presence in order to stay competitive online. He says: “Admirably, WH Smith’s high street sector produced £24m profit over the period, with well-located stores and online growth cited as the catalysts for this. Additionally, a strong performance from its new ‘work from home’ range not only reflects the retailer’s quick adaptation to the pandemic’s impact on consumer demand, but could also present a significant source of future revenue as employers face a decision on the permanence of working from home.
“WH Smith claimed its online card specialist Funkypigeon.com is on track for a record performance for the period, with profit in the mid-teens predicted. However, it remains to be seen how much of this demand is inflated by pandemic restrictions, and a lack of information on investment into whsmith.co.uk suggests the retailer remains dismissive of the channel’s importance to its performance. With Waterstones and Amazon among its competitors, WH Smith would be wise to significantly expand is omnichannel presence to remain competitive online.”
