Shares in WH Smith (LON:SMWH) plunged to a 16-year low after the embattled travel retailer blamed the fallout from the Iran war for its latest profit warning.
The FTSE 250 retailer has seen a downturn in trading due to the Middle East conflict, which has impacted passenger numbers. In addition, weaker consumer confidence has crimped spend per passenger at WH Smith’s travel stores.
Also exerting pressure on the books, magazines and snacks purveyor’s stock price were its plans for a £100 million equity fundraising.
This is intended to bolster WH Smith’s balance sheet and provide fuel for its recovery strategy.
Cash call
WH Smith plans to issue up to 26 million new shares, equivalent to roughly 20% of its existing share capital, through a placing. A retail offer will also be available through RetailBook.
The fundraising is designed to reduce WH Smith’s net debt to EBITDA ratio to below 2 times. Largest shareholder Causeway Capital will participate in the fundraising alongside directors including executive chairman Leo Quinn.
‘There is no doubt that current economic uncertainty and its effect on consumer appetite for spending has created headwinds,’ explained Quinn.
‘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. This placing is a prudent and proactive step to accelerate our transformation of what is, at heart, a good business with some great people and clear opportunity for profitable growth.’
Another guidance cut
The struggling travel retailer slashed its FY26 pre-tax profit guidance. WH Smith now sees taxable profits coming in between £75 million and £90 million, below the previously guided £90 million to £105 million range.
While total revenues grew by 5% over the 14 weeks to 6 June, group like-for-like sales growth slowed to just 1% in the seven weeks to 6 June 2026. This included a 4% decline in its North America division.
WH Smith pinned the blame on the ongoing uncertainty from the Middle East conflict and pressures on gross margins. ‘Management’s expectations for the full financial year reflect the observed and anticipated decline in passenger numbers and weakening consumer demand across all divisions,’ said the company.
The retailer also called out increased promotional activity and inflation headwinds across the group. Worryingly, WH Smith is assuming ‘no near-term improvement in consumer confidence’.
Shares in WH Smith have been in a tailspin in recent times, and we think it could be a while before it recovers.
Accounting issues in its North America division forced former CEO Carl Cowling to fall on his sword. WH Smith has downgraded profit guidance and also suspended the dividend to conserve cash.
As Interactive Investor’s Richard Hunter points out, the capital raise ‘comes at a time which will severely test investors’ patience and loyalty to the cause. Indeed, further investment into WH Smith will require something of a leap of faith as weaker consumer confidence has affected spend per passenger, a reduction in flights in the US has impacted airline capacity, while the Middle Eastern conflict has generally disrupted any progress which the group had been making’.
Read the press release here: https://www.whsmithplc.co.uk/investors
