WH Smith shares fell sharply this week despite booming travel sales, as a trading update raised concerns over slowing growth and a lack of upgrade in profit guidance.
The retail group posted a 28% jump in overall sales in the year to 31 August, as first-half growth of 41% moderated to 17% in the second half of its financial year. Total like-for-like sales were up 18% after growth of 11% in the second half.
The strong revenue growth was driven by the retailer’s travel business, which was up 42% for the full year – with growth of 75% in the first half easing to 23% in the second half. Like-for-like travel sales were up 27% for the full year, driven by strong growth in all regions.
WH Smith said the shape of the sales performance reflected much stronger passenger numbers in the second half than the first half of 2022. Meanwhile, rail had been “resilient” in the face of strikes. The North American travel market had returned to “normal” trading patterns, it added, with growth driven by new openings.
High street sales were up 1% for the full year on a like-for-like basis and down 1% on a total basis.
Despite the sales boost, WH Smith shares dropped 6.3% back to 1,390p on Wednesday – its lowest level since November 2022.
“A sharp slowdown in the pace of sales growth for the travel arm has caused investors to worry,” said AJ Bell’s Russ Mould. “The first-half period a year ago was disrupted by Covid [but] second-half period was more ‘normal’ so it was harder to sustain the big year-on-year growth numbers seen in this year’s first half in the latter part of its financial year.”
Additionally, investors had expected WH Smith to give more clarity on the bottom line impact of the rebounding travel sales ahead of its annual results on 9 November.
Elsewhere, Bakkavor received a strong share price boost on rebounding sales in China and solid performance in its home UK market.
Posting its results for the six months to 1 July, Bakkavor said reported revenues were up 7.9% and like-for-like revenues up 7.4% in the period.
This growth was led by price, and volumes were broadly flat. While volumes were boosted by a strong recovery in China post-Covid, UK volumes were marginally down – but Bakkavor said it continued to outperform the market. Despite suffering supply chain disruption in the first half, inflation and weak underlying UK volume, group adjusted operating profit was up 2.1% to £43.4m.
Broker Peel Hunt, which has a price target of 115p, upgraded its profit forecast for the group this year by 6% on improved trading visibility as cost pressures ease.
Bakkavor was up 2% to 101p on Wednesday and is almost 10% up year on year.