WH Smith (LSE: SMWH) reported full-year results Friday (19 December), showing a 5% rise in revenue to £1.55bn. While UK growth matched the 5%, US revenue jumped 7%, with the rest of the world up 12%. But the share price fell 5% in early trading.
So what’s gone wrong? Let’s take a closer look.
The problems start with headline profit before tax and exceptionals of £108m, down 5.3% from the previous year.
Interim CEO Andrew Harrison said: “It has been a difficult end to the year for the group,” which has shifted focus to being a pureplay travel retailer now after selling its UK High Street and Funky Pigeon businesses. He added: “The board and I are acutely aware that we have much to do to rebuild confidence in WH Smith and deliver stronger returns as we move forward.”
A full-year dividend of 17.3p per share — rebased from the 33.6p paid a year ago — gives shareholders a 2.5% yield. And that’s not much to shout about. But at least it was covered 2.5 times by earnings per share (EPS) of 43.4p.
2026 guidance update
With UK sales growth softening in the first few months of the new financial year, the company offered 2026 guidance for a 4% to 6% rise in revenue. So, pretty much in line with the year just ended, though how that might translate into profit remains to be seen.
These results shouldn’t really come as a surprise after the profit warning in August, when news of “an overstatement of around £30m” in North America profits broke, said to be “largely due to the accelerated recognition of supplier income.”
That news gave the WH Smith share price a kicking, crashing 42% in a single day. After the latest decline, we’re looking at a year-to-date fall of 45% by the time of writing.
CEO departure
Deloitte has since conducted an independent investigation which confirmed accounting inconsistencies in supplier income recognition within the company’s North America division. That led to CEO Carl Cowling stepping down in November. And the company downgraded headline profit expectations to between £100m and £110m.
I’m sure some who still see a strong underlying business will be lining up WH Smith as a potential recovery play for 2026. And I can see some attraction here.
The North America accounting problem was far from the most nefarious I’ve ever seen. It wasn’t good, but it really just affected the timing of profits — and those profits are still actually there.
Travel outlook
The recovery in the travel sector can’t do any harm. International airline passenger numbers are expected to more than double by 2050. Want a solid long-term outlook? We won’t see many investment analysts looking that far ahead.
The latest 43.4p EPS figure puts WH Smith shares on a trailing price-to-earnings (P/E) ratio of 15 though, so the stock doesn’t look like a must-buy right now to me.
But I’m keeping my eye open for updated forecasts. Renewed profit growth potential for the reshaped business could make it one to consider.
