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Summary
- WH Smith Plc is planning to shut down 25 high street stores in the next few months
- The company has reported a £280-million annual loss in the wake of the pandemic
- The company is expected to lose £20 million in cash in November alone in the wake of the second lockdown.
The coronavirus, which prompted the UK government to announce the first lockdown in March, resulted in heavy loss for businesses across the industries. The second national lockdown is adding more woes to the ailing businesses in the country.
British retailer WH Smith has said that it is planning to shut down 25 high street stores over the coming months after the company reported a £280-million annual loss in the wake of the pandemic.
The move will result in the loss of 200 jobs after the company said it is set to close these stores permanently. The decision came after the books to paperclips chain recorded a 19 per cent fall in its sales from the high street business.
COVID-19 impact
WH Smith has seen its business activities going in the doldrums ever since the pandemic has hit the country. Earlier, the retail group had stated that the revenue from its travel shops plunged 92 per cent YoY at the peak of Britain’s national lockdown in April. The travel shop’s revenue was again down in July even after the restrictions were eased to some extent.
In the same month, WH Smith’s revenue across its groups was down by 57 per cent, in comparison with the same period in the last year 2019. Moreover, in August, the company announced that it is likely to slash 1,500 jobs due to the coronavirus pandemic.
WH Smith, which is among the list of Top15 in RXUK Top500 research, feels that considering the rising cases of COVID-19 infections and frequent lockdowns, the group thinks the company can see a recovery in the second half of the next year.
In addition, the company’s travel business has not only been adversely affected in the UK alone but also in North America despite the unit having more robust stores within hospitals. The company is in discussions with its landlords for reducing or getting off the ray payments and to push for a turnover-based rent.
The company is expected to lose £20 million in cash in November alone in the wake of the second lockdown. This has prompted the company to scrap its final dividend, worth £47 million last year. Moreover, the group has already scrapped its half-yearly dividend this year.
CEO Carl Cowling said the company performed well in the H1 of this year and even traded robustly before the pandemic outbreak. The company has been heavily affected by the COVID-19 pandemic.
So far, the company has recorded an annual loss of £280 million (IFRS basis), a sharp fall from a profit of £135 million in 2019. Also, the company remains affected by the pandemic even after receiving £22 million from the British government job retention scheme.
Below is preliminary results announced for the year ended 31 August 2020:
|
Groups Summary |
August 2020 (IFRS) |
August 2020 (IAS 17*) |
August 2019 (IAS 17) |
Per cent change (IAS 17) |
|
Travel trading (loss)/profit |
£ (27) million |
£ (33) million |
£117 million |
(128) % |
|
High Street trading (loss)/profit1 |
£(4) million |
£ (10) million |
£60 million |
(117) % |
|
Group (loss)/profit from trading operations1 |
£(31) million |
£ (43) million |
£177 million |
(124) % |
|
Headline Group (loss)/profit before tax1 |
£(68) million |
£ (69) million |
£155 million |
(145) % |
|
Headline (loss)/earnings per share1 |
(43.3) p |
(44.2) p |
114.7p |
(139) % |
|
Non-underlying costs1 |
£(212) million |
£(157) million |
£(20) million |
|
|
Group (loss)/profit before tax |
£(280) million |
£(226) million |
£135 million |
(267) % |
|
Basic (loss)/earnings per share |
(199.2) p |
(160.0) p |
98.1p |
(263) % |
|
Diluted (loss)/earnings per share |
(199.2) p |
(160.0) p |
97.2p |
(265) % |
(Source: WH Smith Press Release)
The share of the WH Smith Plc (LON:SMWH) started trading at GBX 1,400 on 13 November and later at the time of reporting (14:09 GST PM GST), the company’s stock was trading at GBX 1,335, down by 4.74 per cent.
Also read: WH Smith Plc Issues Profit Warning As Shoppers Disappear Amid Coronavirus Pandemic
What’s next
The 228-year-old company is facing a major financial blow. WH Smith’s travel business, which is the major revenue driver over the years, has witnessed massive revenue fall due to travel restrictions in the last eight months.
In the coming years, the company could see recovery as the travel market has not shut down permanently; however, the frequency of travel will see an impact in the upcoming months as the structure of the travel will see many changes once the coronavirus’s effect will subside to a large extent.
The company had kept about 300 stories of the total 1,600 operational after the first lockdown, especially those in hospitals and post offices, but it did not see much sales.
Though Cowling said, the company saw good trading volumes in October with sales of Christmas cards shot up 50 per cent. However, the second lockdown in November will be tough. He also added that the company is robust and has an agile business plan in place that will sail the firm through during uncertain times.
The statement by Cowling may appear very optimistic, but the ground reality speaks slightly differently, with the company admitting that the sales from its UK’s travel shops could only recover 60 per cent of pre-Covid level by August 2021.
In the near future, there is a possibility that due to restrictions in the travel sector, many of WH Smith’s travel business units will see a dip in its sales potentially due to the desolated railway station and airports.
