- Modest improvement in full-year expectations as travel division rebounds
- Revenue up 23% in 13 weeks to 27 May
- Company ‘excited’ about growth opportunities in North America
A slight improvement in the outlook for retailer WH Smith (SMWH) belies a difficult consumer backdrop and reflects the reality its true growth engine – the travel division – is back firing on all cylinders.
Up 1.1% to £15.45, arresting a recent slide in the share price, WH Smith unveiled a modest improvement in its expectations for the full year to 31 August, underpinned by optimism about its performance during the peak summer trading period.
Total group revenue in the 13 weeks ended 27 May increased by 23% year-on-year, while total revenue in travel increased by 31%. Total travel revenue in the UK increased 24%, while in North America it increased by 26%. In the rest of world, it jumped 79%.
WH Smith said the strong UK growth was driven by various factors including the ongoing return of passenger numbers to pre-pandemic levels, a focus on average transactional value and its ‘travel essentials one-stop shop format’. It said total revenue was up 26% in air and 33% in hospitals, while rail revenue increased 10% despite the impact of ongoing rail strikes.
EXCITED ABOUT FUTURE GROWTH OPPORTUNITIES
The company is ‘excited’ about further growth opportunities in North America, which accounts for 60 of the yet-to-open stores in its 130-strong pipeline.
The high street division was given little airtime in the latest announcement with revenue up 2% in the period.
AJ Bell investment director Russ Mould commented: ‘The company sees a big summer recovery as people jet off for their break in the sun and even the ongoing train strikes don’t seem to be denting the prospects for the travel arm to any great degree.
‘With a pipeline of new stores being rolled out the company continues to execute a growth strategy which was on pause during Covid.
‘All the while the high street operation continues to chug away quietly in the background – its stores may score poorly in consumer surveys but remain a profitable and cash generative part of the group. If that changes pressure may build to spin off the travel unit as a separate business.’
DISCLAIMER: AJ Bell referenced in this article is the publisher of Shares magazine. The author (Tom Sieber) and editor of this article (Steven Frazer) own shares in AJ Bell.
