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Morning Market Pulse - WH Smith: Q3 makes for good reading

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Shares in WH Smith top the FTSE350 this morning, trading their best since early Feb, thanks to a well-received Q3 trading statement versus what it reported for the first six months in mid-April. Group Sales +4% YoY compares favourably with flat growth in H1, as does more gross margin improvement thanks to cost savings. Even better is like-for like sales growth of +1% which has reversed from -1%.

 

Even if the High Street (55% of H1 trading profits) remains under pressure, with sales -1% (both reported and LFL), Q3 is the group’s quietest period (between Christmas and summer) but still much improved on the -5%/-4% reported for H1. Add to this continued strength in the faster growing and more profitable Travel segment (the other 45% of H1 trading profits), with revenues +8% (+3% LFL) versus 7%/3% reported in H1, supported by growing passenger traffic stats from the major airlines, and everything looks rosy.

 

Even the most negative part of the outlook statement (“some uncertainty in the broader economic environment”) hasn’t scared off the bulls. These are more focused on the fact that, in spite of persistent uncertainty (read Brexit), the group continues to grow both at home and abroad  helped by steady investment/store openings. Management can also afford confidence in the FY outcome, now that three quarters of the financial year is already in the bag. Not quite a thriller, but a page turner nonetheless.

 

WH Smith shares +5.2%. Accendo Markets does not have a rating or target price on WH Smith

 

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