Travel Retailer WHSmith Loses Credibility As Shares Collapse By 34%

One of WHSmith’s retail concepts at London Gatwick Airport.

Kevin Rozario

Last week’s spectacular collapse of 34% in the share price of travel retailer WHSmith was a warning that investors—who currently see good options for returns—are taking a hard line when it comes to data inaccuracies from potential stock picks.

British-based WHSmith, which operates more than 1,700 travel retail stores across 30 countries worldwide, made a colossal blunder when it overstated its headline annual trading profit forecast in North America, a region on which the company has placed great emphasis. Last Thursday, the company more than halved the projected figure from £55 million ($74.4 million) to approximately £25 million ($33.8 million), lopping off $40 million. The company’s financial year ends on August 31.

A financial review in preparation for the retailer’s year-end results identified the error, and in revised guidance, WHSmith said: “This overstatement is largely due to the accelerated recognition of supplier income in the North America division.” The company explained that it receives supplier income in the form of supplier incentives and discounts. “These incomes are recognized as a deduction from cost of sales on an accrual basis as they are earned for each supplier contract,” the statement said.

The impact on the group’s headline profit before tax and non-underlying items is also substantial. For the full year, WHSmith is forecasting it to be in the region of £110 million, versus £166 million in the 2023/24 financial year. The retailer’s board has instructed Deloitte to run an independent review.

WHSmith’s stock opened the week on Monday at £10.71 and closed on Friday at £7.11. Most of the collapse took place on Thursday, with an 11% recovery the next day, but leaving the shares languishing at a price not seen since early 2013.

North America is core to WHSmith

At investment provider AJ Bell, investment analyst Dan Coatsworth described the WHSmith news “as nothing short of a disaster.” He added in a daily market update: “The North American business is crucial to the company’s growth ambitions, and the loose thread of an accounting error in this part of the group will create concern about a potential greater unraveling to come.”

This will be a major worry for the WHSmith board, which will try and allay any investor fears via a further update at its preliminary results announcement scheduled for November 12.

WHSmith North America is important because it incorporates Las Vegas-based Marshall Retail Group (MRG) and InMotion, the largest airport-based electronics retailer globally with more than 120 locations throughout the United States. In total, the division represents over half of the company’s international store estate, with about 320 specialty retail stores located in airports and resorts across the United States, and some locations in Canada.

The market has already been cautious on the stock this year following the company becoming a pure-play travel retailer. That long-term ambition was realized with the agreed sale of the online personalized greeting cards business card FunkyPigeon, thus fixing the company’s fortunes to a single distribution channel.

The FunkyPigeon divestment was preceded by the sale of WHSmith’s U.K. High Street business to private equity player Modella Capital, which was completed at a big discount earlier this year. None of it has been greeted with market confidence as, before last week’s crash, WHSmith’s stock had not been performing, down by about 6%.

New formats for WHSmith travel essentials

Selling up the U.K. High Street business, including FunkyPigeon.com, has taken away more than £450 million in annual revenue from the group. The gamble for WHSmith is that it must now become a leading one-stop shop for travel essentials in the more profitable airport business around the world with formats—like at London Heathrow Airport—that extend into categories such as pharmacy and beauty.

Nicholas Found, head of commercial content at Retail Economics said that global travel retail is WHSmith’s “undisputed growth engine” and that the sale of the U.K. domestic business was “a clear reflection of the structural pressures squeezing legacy High Street retailers.”

In North America, WHSmith’s most recent win was a contract for six locations covering 8,400 square feet of retail space at John F. Kennedy Airport’s New Terminal One. NTO’s first phase, including new arrivals and departures halls and the first new gates, is scheduled to open in 2026.

Earlier this year, WHSmith North America also completed a major technology transformation with unified commerce company Aptos aimed at optimal inventory performance and improving data-driven decision-making as new stores come on stream.