Vaccine won’t be an instant fix to ailing travel retailers

WH Smiths

The chief executive of WH Smith has warned he does not expect a Covid-19 vaccine to make any improvement to its travel business for the next six months as the retailer swung to a heavy loss on the back of store closures and redundancy costs.

WH Smith, which has 1,174 travel shops in airports and railway stations around the world, fell to a £280 million pre-tax loss for the year to the end of August compared with a £135 million profit in 2019. Sales slid by 27 per cent to £1.02 billion, reflecting the sharp drop in footfall at its high street outlets and the closure of its travel shops.

The group is using its “essential retail” status to keep 558 of its high street shops open during the present lockdown, compared with 203 in the first round. Nevertheless WH Smith said it expects to burn £20 million of cash this month as a result of renewed restrictions that have led to another slump in footfall.

WH Smith has written down the value of its stores by £135 million, based on the loss of revenues during the pandemic. On top of other impairment charges, including stock write-offs, the retailer has also incurred a £21 million charge from its decision to cut 1,500 jobs in August. On a headline basis, which strips out the non-cash charges, WH Smith reported a £69 million loss, slightly better than analysts’ expectations but a steep fall from its £155 million profit last year.

Carl Cowling, 46, chief executive, said the retailer’s high street business remained “resilient” and had briefly returned to profitability in September and October. Its travel business is performing better in North America, where 85 per cent of passengers are domestic.

WH Smith, which traces its roots to 1792, had made two thirds of its profits from its travel business before the pandemic. The closure of its stores in airports and railway stations dragged the travel division to a £33 million trading loss compared with £117 million of profit last year, while the division’s sales fell by 32 per cent to £553 million.

Mr Cowling said that a new coronavirus vaccine “hasn’t changed our planning . . . there is no indication that travel will improve for the next six months. But if it does, then we are ready for it.”

WH Smith said it would close 25 stores during the year. The business has a further 420 leases due to expire over the next three years.