WHSmith’s group pre-tax profit edged up 2% to £62m in its first half but despite beating analyst expectations, upgrades were dampened by the retailer’s airport stores being closed during the volcanic ash crisis.
Group marketing director Richard Cristofoli said the ash cloud from the Icelandic volcano that grounded flights last week will have a “reasonably significant impact on sales for a few days” but added that the “profit impact will not be significant”. He said the turnover-related rents in airports would help “cushion” the effects.
Shore Capital is upgrading its full-year pre-tax profit forecasts by 0.6% to £87m, but analyst Kate Calvert added: “The upgrade would have been a little more if it had not been for the closure of UK air space due to the volcanic ash and BA strikes.”
Numis analyst Nick Coulter said he had “trimmed” full-year like-for-like forecasts to “reflect the airspace closures”. He added: “WHSmith beat our expectations and remains a well run, cash-generative business.”
The books and stationery retailer reported group total sales dipped 2% to £716m, with like-for-likes down 4% in the six months to February 28.
In its high street arm, operating profit remained flat at £47m. Revenue and like-for-likes both declined by 4%, in line with the retailer’s strategy as it reduces its entertainment category. Like-for-likes dipped 1%, excluding the entertainment category. WHSmith stopped selling CDs and video games in the period, and now just sells DVDs in a portion of its stores.
Its travel arm recorded a 15% uplift in operating profit, to £23m. Revenue climbed 2% while like-for-likes dropped 2%. Group gross margin improved 160 basis points.
The retailer opened 10 travel shops in the period and will open airport stores in two further locations - Muscat in Oman and Dublin.
But Cristofoli said despite the Dublin airport shop, the retailer is not looking to open on the Irish high street just yet.
He said the retailer achieved “good” profit across the group as it “continued to manage costs” and grow margin through “driving sales of higher margin products like books, stationery and souvenirs while moving the mix away from entertainment”.
He added: “Customers are understandably quite cautious. We’re not expecting a massive bounce back in consumer confidence or passenger numbers this year.”
Cristofoli said the retailer had experienced a “challenging book market over Christmas”, with non-fiction sales falling 17%. However, he said WHSmith took share in the period.