WH Smith PLC (LSE:SMWH) has issued a profit warning and launched a cash call to bolster its balance sheet after weaker travel demand and pressure on margins hit trading before the key summer period.
Shares in the travel retailer tumbled 15.3% to 416.8p in early trading on Wednesday.
Revenue was reported to have risen 5% in the 14 weeks to June 6, with like-for-like sales up 2%, before growth slowed in recent weeks, even turning negative in North America.
Middle East flight disruption and ensuing weaker consumer confidence were the cause, resulting in lower passenger spending that weighed on its airport stores.
The FTSE 250 group now expects headline pre-tax profit before non-underlying items of £75 million to £90 million for the 2026 financial year, down from guidance of £90-105 million issued in April.
A loss before tax is likely at the statutory level, as the group also expects a non-cash impairment charge of up to £150 million linked to its InMotion North American airport electronics retail chain, with store exits and restructuring planned.
North American sales have deteriorated, with like-for-like sales falling 4% in the past seven weeks, with InMotion down 5% and resorts down 11%, hit by fewer Las Vegas visitors.
WHSmith plans to raise capital through a placing of up to about 26 million shares, or about 20% of existing share capital – roughly £100 million. A retail offer will also be available through RetailBook, with a minimum subscription of £250.
Executive chair Leo Quinn said the placing was “a prudent and proactive step” to support the transformation and reduce leverage nearer to below two times.
"There is no doubt that current economic uncertainty and its effect on consumer appetite for spending has created headwinds. In this environment, sorting legacy issues while investing in the core model requires the financial flexibility of a stronger balance sheet in lock-step with self-help."
The board launched a 'self-help' programme in early April across the group, focused on strengthening operations and finding efficiencies.
"We are now taking action to sell, exit or renegotiate loss-making or low-return situations and, where appropriate, we are replacing directly-run operations with franchises in sub-scale markets".
Broker Peel Hunt said US trading has "slowed significantly" with LFL sales in the key travel area shifting over the last seven weeks from +6% to -1% and "a lot of promo going on", squeezing profit margins.
"We now expect EBIT to be closer to £20 million versus our prior £30 million forecast" and headline PBT "moves from £91 million to the low end of management’s revised £75-90 million guidance range".
The cash call is seen as management "taking action on debt", bringing leverage down from around 3x earnings to 2x.
Analyst Nick Hyett at Hargreaves Lansdown added: "Executive Chairman Leo Quinn has a great track record of turning around struggling businesses, and while trading is hardly dire at the moment, he clearly sees lots of work to be done."
** UPDATE: Adds share price and broker comment **
