WH Smith

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WH Smith has performed better than expected as customer numbers at its travel sites and high street stores slowly recovered with Covid restrictions easing over the summer. However, the retailer warned the trajectory of the recovery in travel remained uncertain and profits in the new financial year would be at the lower end of forecasts.

Total group revenue was back at 71% of pre-pandemic levels in the eight weeks to 28 August, with sales on the high street at 84% of 2019 levels and the travel division at 64%.

The pre-close trading update for the year ended 31 August revealed revenues gained momentum as lockdown ended, with group sales in the first half of the year hitting 60% of where they were in 2019 and 65% in the second half.

Passenger numbers at UK travel destinations remained significantly down versus 2019 but WH Smith reported a gradual recovery in sales as restrictions eased throughout July and August, with sales up to 48% of 2019 levels, compared to 30% in the first half and 38% in the second.

Revenue in the airports stores were well below 2019 in the first and second half of the year at 16% and 17% respectively, while figures in the past eight weeks increased to 30% of pre-pandemic sales.

Stores in train stations fared better, with sales up to 58% of 2019 levels in the past eight weeks, improving from 23% in the first half and 42% in the second.

Outside of the UK, the North American travel business was back at 93% of 2019 sales over the course of July and August.

WH Smith said the outcome for the year to 31 August was slightly ahead of expectations outlined in the last trading update in July.

“As previously stated, we remain confident in revenues returning to pre-Covid levels in the next two to three years,” the group added.

“While there will be a return to good levels of profitability in the year ending August 2022, the trajectory of the recovery in travel remains uncertain. This combined with the previously announced accounting finance charges relating to the successful convertible bond issue on 29 April 2021, means that we currently anticipate the levels of profitability for the year ending August 2022 will be at the lower end of market expectations.”

“Although the pace of recovery varies across our markets, we are financially strong and well placed to capitalise on the multiple growth opportunities in our key markets.”

Shares in the retailer plunged 4.9% this morning to 1,551.5p as the markets picked up on the lower profits forecast for the 2021/22 financial year.

Morning update

Food prices are coming under increasing pressure as rising costs continue to hammer suppliers and retailers, according to the latest industry data.

The British Retail Consortium predicted prices would likely rise in the coming months following months of increased commodity and shipping costs, as well as problems stemming from the HGV driver shortage.

Food deflation decelerated to 0.2% in August, compared with 0.4% in July, the latest BRC-NielsenIQ monthly shop price index showed. It is the fifth consecutive month of falling food prices.

Fresh food prices fell for the ninth consecutive month in August, with deflation easing to 0.6% from a decline of 1% in July.

Ambient food inflation eased to 0.3% in August, down from 0.5% in July. This is the lowest rate of inflation for the category since January 2017.

Shop prices overall eased to 0.8% year-on-year last month, compared with July’s 1.2% decrease.

Non-food deflation slowed to 1.2% in August, compared with a fall of 1.8% in July.

BRC chief executive Helen Dickinson said there were some modest signs rising costs were starting to filter through to product prices, with non-food categories such as electricals seeing sharp increases due to global issues with delayed shipping and microchip shortages.

“Food retailers are fighting to keep their prices down as far as possible,” she added. “But mounting pressures – from rising commodity and shipping costs as well as Brexit-related red tape – mean this will not be sustainable for much longer, and food price rises are likely in the coming months.”

Mike Watkins, head of retailer and business insight, NielsenIQ, said: “With shoppers now returning from their summer holidays many will be reviewing their household budgets. So, the next few months will be an important time for retailers to keep prices stable by absorbing as much of any increase in their supply chain costs as possible.”

SSP Group has handed Jonathan Davies the title of deputy chief executive alongside his current role as chief financial officer as the travel food concession operator continues to search for a new boss to replace outgoing Simon Smith.

In July, Smith revealed he was leaving the group after less than two years at the helm for a lucrative job at an unnamed private equity firm.

SSP said this morning that the process to identify a successor for Smith was “progressing well”.

Chariman Mike Clasper added: “I’m delighted that Jonathan is taking on this role, which will ensure continuity of leadership during the transition period and provide invaluable support to the new CEO when appointed.

“Jonathan’s long experience and extensive knowledge of the business have been key to SSP in responding to the challenges of the pandemic. Under his stewardship, SSP has maintained a tight control of its operating costs and created a strong liquidity position.

“His financial and commercial expertise will continue to be essential as we move into the next phase of our strategy, re-opening the estate and taking advantage of the many new opportunities we anticipate as the travel sector recovers.”

Shares in SSP jumped 2.6% to 279.7p on the news.

Sales and profits bounced back at French drinks group Pernod Ricard as the hospitality industry reopened following long lockdowns across the world.

The Jameson, Absolut and Havana Club owner reported sales of €8.8bn (£7.6bn) in the 2021 financial year, with organic growth of 9.7% pulled back to reported growth of 4.5% as a result of adverse currency translation.

Sales grew in all regions, with the Americas up 14% as “excellent broad-based growth” in the US, Canada and South America offset decline in travel retail. Asia and the rest of the world increased 11% and Europe was up 4% as a “dynamic” rebound in the UK, Germant and Eastern Europe offset declines in Spain, Ireland and the travel retail channel.

In the fourth quarter of the year, revenues soared 56.5% higher to €1.9bn (£1.6bn), compared with a low base a year earlier as bars, pubs and cafes remained shuttered.

Full-year profits from recurring operations rose 18.3% to €2.4bn as margin expanded.

CEO Alexandre Ricard said the business rebounded “very strongly” in the year and exceeded 2019 levels.

“We expect this good sales momentum to continue in FY22 with, in particular, a very dynamic Q1.

“I would like to take this opportunity to praise the exceptional commitment of our teams during this difficult time and express my support to those who have been or continue to be impacted by this pandemic.

“We will stay the strategic course, accelerating our digital transformation and our ambitious sustainability & responsibility roadmap. Thanks to our solid fundamentals, our teams and our brand portfolio, we are emerging from this crisis stronger.”

Shared in the French group leapt 3.2% to €183.70 this morining.

The FTSE 100 made a positive start as we entered September, climbing 0.7% to 7,166.62pts.

Earlier risers in the food industry included McBride, Pernod Ricard, SSP Group, Delivery Hero and Just Eat Takeaway, while McColl’s Retail Group, WH Smith and Carrefour were among the fallers.

Yesterday in the City

The FTSE 100 ended August by falling 0.5% to 7,110.99pts.

Sainsbury’s shares continued to slump after last week’s blockbuster rise as investor excitement over takeover speculation fades away. The stock fell 1.9% to 304.4p yesterday and edged closer to the level before the unconfirmed reports around Apollo Global Management’s interest surfaced.

There was little company news yesterday to affect the markets as the City slowly began to return from summer holiday season.