WHSmith admits ‘much to do to rebuild confidence’ as profits fall

The retailer acknowledged “a difficult end to the year” and that there is “much to do to rebuild confidence” and in the new financial year profit is expected only to be flat.

Headline group profit before tax and non-underlying items fell from £114m to £108m in the year to August 31, and trading profit was down from £170m to £159m. Total group revenue rose 5% to £1.55bn.

In the UK, headline trading profit was up £8m to £130m, while North America fell £19m to £15m.

WHSmith interim chief executive Andrew Harrison, who took over from Carl Cowling, who left after accounting problems were discovered at the US division, said: “It has been a difficult end to the year for the group. The board and I are acutely aware that we have much to do to rebuild confidence in WHSmith and deliver stronger returns as we move forward. We are acting at pace progressing our remediation plan, and are committed to ensuring that we strengthen our financial controls and governance as we move forward.

“Following the sale of our UK high street business and Funky Pigeon during the year, we are now a pure-play global travel retailer. Travel retail is a high-growth market, and we have attractive market positions in the UK, North America and our international markets from which we are well-positioned to grow.

“I would like to thank our colleagues who have shown the utmost commitment and professionalism during an uncertain and busy period for the business.

“As Interim CEO, my focus is to provide stability and to lead the group with transparency and discipline. WHSmith is a business with an exciting future, and I look forward to executing against our clear priorities to ensure we capitalise on the attractive opportunities ahead.”

In the current financial year, WHSmith expects total revenue growth of between 4% and 6%. Headline trading profit margin in the UK is expected to be between 14% and 15%, North America 7% to 8%, and about 5% in the rest of the world. The retailer said: “This reflects the different dynamics in each market: a year of investment in the UK, a focus on rebuilding profitability in North America and strengthening our foundations internationally.”

Headline group profit before tax and non-underlying items in the current year is expected to come in between £100m and £115m.

The Financial Conduct Authority is investigating the retailer following the problems in the US.