Travel rebound pushes WHSmith quarterly sales to pre-pandemic level

WHSmith said full-year profits would be towards the top end of market forecasts as its travel business continues to recover, providing some rare positive news in a sector that has been battered by concerns about the rising cost of living.

The FTSE 250 group said on Wednesday that revenue in the 15 weeks to June 11 was ahead of pre-pandemic levels for the first time, sending its shares up 5 per cent to £14.35 in early trading.

WHSmith’s increasingly global travel division, which operates more than 1,100 stores in airports, railway stations and hospitals, is driving the recovery.

Sales grew 123 per cent compared to the same period in 2019, as more regions of the world opened up to domestic and international travel. New store openings and the acquisition of Marshall Retail Group in the US in late 2019 also contributed to growth.

Before the update analysts had been expecting full-year profits of £65-72mn after two years of losses, although that would still be less than half the £155mn achieved in the year to August 2019.

The shares are also a long way off their December 2019 high of more than £25.

But RBC analyst Richard Chamberlain said there was potential for further profit upgrades over the summer, given the strong recovery in air travel as consumers respond to the easing of Covid restrictions.

WHSmith said it was “well placed to capitalise on the ongoing recovery in our key markets” and pointed to a pipeline of 125 travel locations where tenders had been won but stores not yet opened. These include 31 outlets in Spain, a key market for leisure travel. It expects to open 20 of these in time for the peak summer holiday season.

The company has adapted the ruthless product selection model long used in its UK high street business to shift its airport stores away from relatively low-margin goods, such as books and magazines, and into higher-margin areas such as technology, pharmacy and health and beauty.

The focus on maximising sales per square foot makes the group popular with airport operators, whose leasing model is usually based on taking a percentage of the sales achieved by the store.

WHSmith has also expanded rapidly in the US market, where most flights are domestic and airport retail outlets are skewed towards convenience items rather than duty-free purchases. It acquired InMotion, a technology-focused travel retailer, for £155mn in 2018 and has since introduced the format to airports outside the US.

In the UK high street business, revenue in the third quarter was 79 per cent of pre-Covid levels, although this reflected the impact of a cyber attack on FunkyPigeon, its online greetings card business.