WH Smith warns on profits for second time

(Sharecast News) - WH Smith cut profit guidance for the second time this year on Wednesday, as war in the Middle East curtailed travel and weighed on consumer demand. Updating on trading in the 14 weeks to 5 June, the British retailer - which has around 1,300 shops in airports, rail stations, hospitals and resorts worldwide - saw global sales rise 2% on a like-for-like basis.

Weighing on the figure were British airport sales, which eased 1%, and ongoing issues in its troubled North America division, where a 9% slide in resorts saw total sales weaken 1%.

WH Smith said that air passenger numbers in both the UK and US had been impacted by the outbreak of war in the Middle East and weaker consumer confidence. Margins also came under pressure in North America as the chain boosted promotional activity in response to weaker demand.

As a result, the FTSE 250 firm now expects full-year headline profits before tax and non-underlying items to come in between £75m and £90m.

It is the second time WH Smith has warned on profits this year, after it cut its outlook in April to £90m and £105m from an initial forecast, made in December, of between £100m and £115m. It also suspended its dividend in April.

The group, which is undergoing a restructuring, also announced plans for a capital raise representing 20% of its share capital.

It said the fundraise was a "prudent and proactive step which will strengthen the balance sheet, enable continued execution of the group's growth and transformation agenda, provide greater confidence around the group's leverage position and reduce the group's reliance on debt funding as it executes its long-term growth strategy".

WH Smith was hit hard at the end of last year when it emerged that accounting errors in its US business had gone on for years, prompting chief executive Carl Cowling to step down with immediate effect and forcing the retailer to restate earnings.

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