WH Smith has suspended its dividend and slashed its profit guidance after disruption to global air travel linked to the war in Iran hit passenger numbers at airports and transport hubs.
The retailer, which operates around 1,300 stores in travel locations worldwide, warned that annual profits are now expected to fall to between £90 million and £105 million, down sharply from £108 million last year and below previous forecasts.
Shares in WH Smith fell more than 10pc in early trading on Thursday as investors reacted to the downgrade and the suspension of shareholder payouts, a move the company said was intended to strengthen its balance sheet amid heightened uncertainty.
The group said: “In light of the uncertainty arising from the conflict in the Middle East, the group is taking a more cautious outlook reflecting the impact on passenger numbers and weaker consumer confidence.
“Much will depend on the peak summer trading period, and the group assumes no immediate improvement in consumer confidence and assumes that jet fuel supplies can be maintained.”
The group, which relies heavily on spending in airports and railway stations, said like-for-like UK revenues were flat in the first seven weeks of its second half, reflecting a drop in passenger volumes amid continued disruption to international travel linked to conflict in the Middle East. Overall group revenues rose just 2pc over the period.
The downgrade marks another setback for the retailer after a difficult year that saw it embroiled in an accounting scandal in its US division. An internal review by Deloitte found “shortcomings” in its audit processes, which led to the overstatement of profits in the American business by up to £50 million.
The fallout from the accounting issues resulted in the departure of former chief executive Carl Cowling and prompted an investigation by the Financial Conduct Authority.
The company has since appointed former Leo Quinn, ex-chief of infrastructure group Balfour Beatty, as executive chairman in an attempt to stabilise operations.
He said: “The immediate focus is to restore confidence and ensure the right foundations are in place to support profitable growth and long‑term value creation.
“Moving forward, the board and management team will have a relentless focus on driving cash, cost discipline and strengthening the balance sheet.
“As a first step, the board has taken the prudent decision to suspend the dividend.”
WH Smith said the combination of weaker passenger traffic and earlier internal disruptions meant visibility for the year ahead remained limited, with trading heavily dependent on the recovery of global air travel flows.
Analysts warned that the retailer’s exposure to airports leaves it particularly vulnerable to geopolitical shocks that reduce travel demand, with little offset from its smaller high street operations.
The suspension of the dividend is likely to intensify scrutiny from investors already concerned about the group’s balance sheet and strategic direction following a turbulent period for the business.
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