The UK retail sector is struggling. Real wages are falling. Brexit uncertainty is everywhere. Any yet, WH Smith (LON:SMWH) – a 225-year old company in the direct path of the Amazon (NASDAQ:AMZN) juggernaut for years now – just hit an all-time high a few pence shy of £21. What’s going on?
Well, while the firm is far from issue-free, it has found a way to hone in on the positives. Back in January it posted a 1% rise in like-for-like sales for the 21 weeks to 21st January, with total sales up 2%, thanks, in part, to the success of spoof titles compensating for the drop off in sales adult colouring books.
Its half year figures in mid-April also impressed, with WH Smith posting a 3.75% increase in pre-tax profit to £83 million. Once again there was the familiar sight of a split between its travel and high street divisions; the former saw its LFLs jump 5%, only to be countered by a 3% fall in the latter, leaving the company’s overall comparable sales flat year-on-year.
That divergence remained in June’s third quarter update. While the travel division – which includes shops in airports and train stations – maintained a robust 5% rise in like-for-likes, its high street sibling saw its decline accelerate as comparable sales slid by 4% for the period. However, investors were pleased with the steps WH Smith is taking to mitigate this decline, with its in-store Post Office opening programme ‘on track’.
The company’s latest statement came at the end of August, and though WH Smith didn’t provide any hard data, the confirmation that ‘cost savings and margin improvements have been delivered in line with [its] profit-focused strategy’, alongside news of its first 3 stores in Italian airports, helped spark the stock’s super September surge.
In terms of next week’s annual results, analysts are expecting WH Smith to post pre-tax profit somewhere between £138 million and £140 million, roughly a 6% increase on the £131 million posted in 2016.
WH Smith PLC is at a current trading price of £20.43, and has a consensus rating of ‘Hold’ with an average target price of £18.05.
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