WHSmith is to raise money through a new share placing after cutting profit expectations and warning on its outlook as conflict continues in the Middle East.
The retailer revealed that although total sales in the 14 weeks to June 6, 2026, rose 5%, or 2% like-for-like, performance has deteriorated in the key North American market following air fare inflation and “a reduction in airline capacity linked to the Middle East conflict”.
WHSmith reported: “Given the ongoing uncertainty from the Middle East conflict and pressures on gross margins, including the recent deterioration in the North America division, the group expects to deliver FY26 headline group profit before tax and non-underlying items of £75m to £90m.”
At the time of its interims in April, WHSmith expected headline profit to come in between £90m and £105m.
Funds are being raised through a share placing “representing approximately 20% of the company’s existing share capital” and a retail offer. At the time of writing, WHSmith’s market capitalisation was just over £778m.
Announcing the capital raise, WHSmith executive chair Leo Quinn said: “Early in April, we launched a far-reaching self-help programme across WHSmith. Our goal is to greatly strengthen the group’s operations while driving more effective implementation of value creation.
“The business has a strong core and operates in attractive markets with ample scope for profit expansion, particularly in North America. However, we need much greater capital discipline and a laser focus on returns. In recent years, the outcomes from certain acquired businesses and contract obligations have been very disappointing. Our priorities are to build an efficient and effective foundation for WHSmith and use this to drive a growth strategy managed for profitability.
“In particular, we are now taking action to sell, exit or renegotiate loss-making or low-return situations and, where appropriate, we are replacing directly run operations with franchises in subscale markets. While we make meaningful progress in these areas, we must continue to invest in our core business to drive more productivity. Our underlying processes and systems need upgrading to provide the data for stronger management of risk, working capital and speed of response. We are hiring the right people to deliver these changes.
“The impact of these actions will both require investment and result in a substantial non-cash write-off, but the returns to be had are clear.
“There is no doubt that current economic uncertainty and its effect on consumer appetite for spending has created headwinds. In this environment, sorting legacy issues while investing in the core model requires the financial flexibility of a stronger balance sheet in lock-step with self-help. This placing is a prudent and proactive step to accelerate our transformation of what is, at heart, a good business with some great people and clear opportunity for profitable growth.
“The consequent reduction in leverage nearer to our stated ambition of leverage below 2x will enable us to take the right actions at pace and strengthen the group’s platform for future profit growth, all with the intention of delivering significant value upside.”
WHSmith had already been hit after the discovery of an accounting issue at the US business, prompting the departure of former chief executive Carl Cowling. Regulator the Financial Reporting Council is probing PwC’s auditing of the accounting error period.
In the 14 weeks just reported, WHSmith’s total revenue in North America rose 10% while like-for-likes were down 1%. That rose to a decline of 4% over the last seven weeks.
In the UK total revenue rose 5% or 2% like-for-like. The retailer said: ”Air passenger numbers continue to be impacted by disruption to Middle East flight schedules and weaker consumer confidence has impacted spend per passenger, resulting in a lower level of growth during the period.”
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