WH Smith PLC (LSE:SMWH) has delivered full-year results in line with expectations that were revised after a recent profit warning that has sparked a regulatory probe, but the focus among City analysts has shifted firmly to the group’s next steps.
After a turbulent year, which apart from the accounting investigation also included a strategic overhaul as it sold its High Street business and funkypigeon.com, the retailer reported adjusted profit before tax of £108 million, at the top end of revised guidance.
Yet the tone around future performance remained somewhat restrained, with management guiding to 2026 adjusted profit of between £100 million and £115 million, below consensus estimates, and announced net store closures across international markets.
Analyst Hai Huynh at UBS said the outlook for the new financial year implied around 10% downgrades, though he noted that “market expectations had already shifted”.
In North America, where accounting issues triggered a 38% share price fall since August, the group is pulling back from some stores, including in Las Vegas, while also reviewing the InMotion electronics banner.
Peel Hunt analyst Jonathan Pritchard said the margin target of 7-8% in the US was “satisfactory enough” given the reset, with the closures of some US stores signalling a more selective expansion strategy.
The UK travel business remains the strongest contributor, with 5% like-for-like growth and trading margins expected to hold at 14-15%.
However, UK growth is softening into 2026, with LFL growth slowing to 2%. Rest of World revenue grew 7% LFL, but restructuring will see further exits from non-core markets.
For investors, the priority is less about earnings beats and more about stability and governance, said Dan Lane, analyst at Robinhood UK.
“Today is about outlining plans to regain trust more than anything," he said, with the North American downgrade "brutal, but refocusing on core travel retail offers a rare positive".
While free cash flow improved to £63 million and store productivity rose, net debt increased to £390 million and management expressed commitment to reducing leverage below two times EBITDA.
With the FCA having opened an investigation into the company related to the findings of the Deloitte review, interim chief executive Andrew Harrison promised a remediation plan is “progressing at pace”, but the company faces a longer journey to restore confidence.
The shares trade on roughly 9.5-10x forward earnings, a level some analysts view as undemanding.
Peel Hunt's Pritchard said “the clarity given today is a plus" and sees upside "when the dust settles".