WH Smith (LON:SMWH) shares fell 3.3% after the retailer reported a sharp decline in annual profit, describing the year as a “difficult end to the year.”
Interim CEO Andrew Harrison said the company is focused on rebuilding investor confidence after a review revealed accounting shortcomings in its North American division.
For the year ending 31 August, pretax profit from continuing operations fell to £2 million, down from £65 million a year earlier. Trading profit slipped to £173 million from £182 million, while adjusted pretax profit dropped slightly to £102 million from £106 million. Revenue rose to £1.55 billion, up from £1.47 billion, with like-for-like sales in the final 13 weeks increasing 3%.
The decline stems from the early recognition of supplier discounts in North America, rather than recording them in later years. The division reported £22 million for the year, below the £55 million forecast, and prior periods were restated to correct the accounting treatment.
The final dividend has been cut to 6p from 22.6p last year, reducing the projected yield to 2.5%, while the FCA continues to review the matter.
The North American unit makes up 27% of group revenues. WH Smith had previously highlighted growth potential in airports, where passenger numbers are expected to more than double by 2050. The review has prompted a reassessment of the InMotion business, though Travel Essentials remains central to the group’s strategy.
Earlier this year, WH Smith sold its high street business, focusing on travel retail. The remaining operations include captive locations at airports, railway stations, motorway services, and hospitals. The company has broadened its offering, adding health and beauty, technology, food, and pharmacy items alongside books and newspapers, with InMotion stores providing a convenient one-stop option for international travellers.
Economic uncertainty and competition continue to affect the business, alongside currency headwinds in its international operations.
On a restated basis, revenue increased 5% to £1.553 billion, adjusted pretax profit fell 5%, actual pretax profit dropped to £16 million from £74 million, and trading profit declined to £159 million from £170 million. Current trading shows like-for-like growth of around 3%, with guidance for next year pointing to 4–6% revenue growth and adjusted pretax profit of £100–115 million.
WH Smith shares have fallen 42% over the past year, highlighting the challenge needed to restore investor confidence.