UBS has cut its price target on WH Smith PLC (LSE:SMWH), to 480p from 600p, after the retailer’s profit downgrade and proposed equity raise, which the Swiss bank says has pushed attention firmly onto the North American recovery.
The broker is sticking with a Neutral rating, so hasn't gone completely bearish on the shares, given that the revised target still implies around 17% upside from the 410p price cited in its note.
WH Smith, this week, cut FY26 adjusted pre-tax profit guidance to £75mln–£90mln from £90mln–£105mln, while also proposing the issue of up to around 26mln new shares to strengthen the balance sheet and fund its transformation plans.
“Although Q3 revenue was in line with H1 trends, recent momentum weakened,” UBS noted. North America sits at the heart of the downgrade. UBS said weaker trends in the region, alongside macro pressure and gross margin pressure, mean it now expects adjusted pre-tax profit to land near the lower end of WH Smith’s revised guidance range.
The bank cut revenue forecasts by around 2% across FY26 to FY28 and reduced adjusted pre-tax profit estimates by 15%, 14% and 9%, respectively, over the same period.
UBS said the capital raise gives WH Smith more flexibility to fund exits, restructuring and growth capex, describing it as “a proactive step rather than a bank-driven action”. Still, the move underlines the strain on the balance sheet. “Leverage of 2.9x at H1 was too high given weaker trading, heavy Q4 profit weighting and ongoing investment needs,” it added.
UBS assumes a roughly £100mln raise, which it estimates would reduce leverage by around 0.5 times and bring year-end leverage closer to 2 times, albeit at the cost of material dilution.
The broker is more positive on WH Smith’s accelerating portfolio simplification and sharper focus on Travel Essentials, but said the operating recovery still depends on stabilisation in US traffic, spend per passenger, promotional intensity and brand marketing support.
Moreover, UBS is now accounting for a slower recovery path.
WH Smith shares trade on around 10 times FY27 estimated earnings and are down around 35% year to date, UBS noted.
