Coronavirus: WH Smith could see £130m wiped off revenues amid pandemic panic

WH Smith has warned of a major hit to its annual revenues and profits after a “material reduction in passenger numbers” at airport sites in the UK, US and Europe.

High street stalwart WH Smith has hundreds of sites in major airports and railway stations.

The retailer, which operates hundreds of stores at travel locations such as airports and railway stations, said it believes the Covid-19 outbreak could knock up to £130 million off its revenues for the current financial year.

It is also currently predicting that the health pandemic will impact upon underlying pre-tax profits by between £30m and £40m for the year to August 2020.

WH Smith said coronavirus has had a “significant impact” on its Asia Pacific travel business, as well as a “material reduction in passenger numbers” at airport sites in the UK, US and Europe.

The update came as the group reported that its fast-growing travel business helped offset high street decline to drive the company to sales growth over the past six months.

It believes that Covid-19 will result in a “reduction in our expectations for revenue and profit across the travel business for the second half”, on the basis of a “challenging” third quarter and “modest normalisation” in the fourth quarter.

Revenues for its UK travel business are predicted to fall 15 per cent below forecasts for the next six months, with a 35 per cent decline in March and April.

The firm said it predicts sales in the US division and the rest of its international business to fall 20 per cent below forecasts for the half-year.

Bosses also recognised that the virus “could result in reduced high street footfall”, but said the firm has not yet seen a significant impact on the high street arm.

The retailer reported that group total revenue rose by 7 per cent in the six months to 29 February, with like-for-like revenues dipping 1 per cent.

The travel business saw sales increase by 19 per cent with like-for-like sales growth of 2 per cent. Meanwhile, the high street business saw revenues fall 5 per cent with like-for-like revenues down 4 per cent.

In its trading update, the company noted: “WH Smith is a resilient business with a strong balance sheet, substantial cash liquidity and strong cashflow.

“The group has a strong management team in place and has consistently demonstrated that it can adapt and respond quickly to changing market conditions.

“Over the longer term, the board remains confident in the strategy and believes the group is well positioned to benefit from the normalisation and growth of the global travel market.”

Neil Wilson, chief market analyst for Markets.com, said: “You have to feel a little sorry for a company that has done a brilliant job of pivoting away from the struggling British high street to driving all its revenue and profit growth from airports and train stations.

“A rapid decline in footfall at travel sites because of the coronavirus is hitting revenues and will result in a material decline in profits this year.”

He added: “[US President Donald] Trump’s 30-day European travel ban only makes things worse and threatens to make [these] estimates only partially reflective of the level of damage that could be done this year.”