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WH Smith shares plunge after coronavirus profit warning

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
A WHSmith store at Holborn in London, England. (John Keeble/Getty Images)

Shares in newsagents WH Smith (SMWH.L) plunged 15% on Thursday after the retailer warned profits and sales this year would be lower due to coronavirus.

Slumping global travel means fewer people are picking up newspapers, magazines, and snacks at airports and train stations around the world.

WH Smith said it has seen “a significant impact” on its business in Asia since February, as people stop going to shops and air travel slumps. The decline in global travel will also hit revenues from airport stores in the UK and US, WH Smith said.

The spread of the COVID-19 and efforts to contain it could also hit High Street sales, WH Smith warned. However, the retailer said it is “not seeing a significant impact” so far.

Overall, sales are expected to be £100m ($128m) to £130m lower than previously expected in the 12 months to 31 August 2020. Pre-tax profit is likely to be between £30m and £40m lower.

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“Clearly, the position is evolving fast and the Group will provide a further update at its interim results on 22 April,” the company said.

Management stressed that WH Smith is “a resilient business with a strong balance sheet, substantial cash liquidity and strong cashflow”.

Neil Wilson, chief market analyst at Markets.com, said a travel ban between the US and EU announced by President Donald Trump overnight would likely do more damage to WH Smith.

“Trump’s 30-day European travel ban only makes things worse and threatens to make today’s estimates only partially reflective of the level of damage that could be done this year,” Wilson said.

WH Smith published half-year results alongside the profit warning, showing sales up 7% in the 6 months to 29 February. Airport and train station revenue was up 14%, while High Street sales fell by 5%. The company said pre-tax profit for the first half was on track with expectations.

“First half revenues and profits look solid enough but no one is trading the shares on that,” Wilson said.

WH Smith five-day stock chart on Thursday. (Yahoo Finance)