Interactive Investor

Travel business keeps driving WH Smith results success

20th April 2023 08:41

by Richard Hunter from interactive investor

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There's lots to like in half-year results from the newsagent chain, but it's trade in airports and train stations that keeps the business going. Our head of markets explains.


Growth in the Travel business, which is now the driving force behind the group, continues apace at WH Smith (LSE:SMWH) where overseas expansion is providing further scope. 

The company has edged further to becoming a global travel retailer, and expects that by the end of this year the Travel unit will provide 70% of revenues and 85% of group profit. Sixty new stores have already been opened this year, with a further pipeline of 120 stores which includes 60 in its burgeoning North American presence.

At the Smith’s largest division, Travel UK, revenues were 19% higher in the six months ended 28 February 2023 than pre-pandemic levels, despite passenger numbers remaining significantly lower. The group nonetheless expects a full return to normality by next year and is well placed to benefit from the recovery.

WH Smith benefits from “captive” customers in many of its key sites, such as railway stations, motorway services, hospitals and, in particular, airports, which sets it aside from much of the retail competition. The return of near normality in air travel has been a particular boon to this segment of the group.

At each of its locations, the group is aiming for a one-stop shop approach by expanding its more traditional books and newspaper offering to include health and beauty, technology, food and pharmacy products. able to provide time-pressed customers with all their travel essentials under one roof with a fast and convenient shopping experience.

This update has seen an increase of 41% in revenues, which has helped pre-tax profit increase to £43 million from just £11 million in the corresponding period. Trading profit slipped slightly at the High Street business, where competition is more visible and present, although Smith’s flexible rent model provides scope and flexibility in ensuring that only those stores with real economic value are maintained.

The announcement of a further dividend is clear evidence of management confidence in prospects, while a proposed round of capital expenditure to the tune of £150 million should drive further opportunities. Quite apart from the growth in the North American business, the group has high hopes for expansion in the “Rest of the World” unit, with an increasing presence including the likes of Australia, Scandinavia and Germany.

In terms of outlook, the group has stated that current trading continues to build and is ahead of expectations for the full year. Such ambitions are before the traditionally busier summer season kicks in, which should see some of the numbers skewed towards a stronger second half.

Despite the progress, the share price remains shy of pre-pandemic levels by some 40%. Even so, of late the shares have outperformed, with a 35% bounce over the last six months contributing to a gain of 11% over the last year, which compares to a decline of 9% for the wider FTSE250.

The opportunities which both recovering passenger numbers and international expansion provide are pivotal for prospects, and the market consensus of the shares as a 'buy' reflects confidence that the shares can continue the recent momentum.

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