ii view: resurgent WH Smith beefs up shareholder returns

Fourth-quarter trading update to 31 August

• Like-for-like revenue up 4%
• Travel store like-for-like revenue up 6%
• UK high street like-for-like revenue down 3%
• New £50 million share buyback programme

Chief executive Carl Cowling said:

"We have ended the financial year in a strong position, delivering a performance in line with our expectations with good growth across our Travel businesses. Our UK division performed particularly well over the peak summer trading period.”

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ii round-up:

WH Smith (LSE:SMWH) is a retailer selling newspapers, books, stationery, and other convenience products. 

It operates through the two divisions of Travel related stores both in the UK and overseas and UK High Street outlets. 

Other brands include its InMotion branded technology related stores, often situated next to its travel related stores at airports both in the UK and internationally, and its online stores WHSmith.co.uk and Funkypigeon.com. 

For a round-up of this latest trading update announced on 11 September, please click here. 

ii view:

Started by Henry Walton Smith in 1792, today the Swindon headquartered retailer employs around 14,000 people. Operations at the FTSE 250 company include approximately 1,250 travel related stores in places such as airports, railway stations and motorway service stations across the UK, US, and the rest of the world, as well as approximately 500 outlets across UK high streets. The sale of on-the-go-food like sandwiches means it competes with Greggs (LSE:GRG) and Marks & Spencer Group (LSE:MKS). 

For investors, technology and its impact on group product categories such as newspapers, books and stationery should not be overlooked. Investment in expanding its North American outlets has weighed on profits. Like-for-like, or same store sales for the UK high street business continue to fall, while currency headwinds warrant consideration given growing overseas operations.

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To the upside, UK high street initiatives include the opening of ‘Toys R Us’ outlets within its own stores, with more than 70 expected to be operating by Christmas. New travel related stores, particularly in North America, remain a management focus. The food-to-go brand, ‘Smiths Family Kitchen’, is now a focus for travel convenience sales, while shareholder returns given an estimated dividend yield of around 2.4% and a new £50 million share buyback programme are not to be ignored. 

For now, and while retreating UK high street sales offer room for caution, growing travel sales and a consensus analyst estimate above £15.50 per share are likely to maintain investor interest in the shares. 

Positives: 

• Product and geographical diversity
• Growing store numbers

Negatives:

• Uncertain economic outlook
• Overseas ops bring currency volatility 

The average rating of stock market analysts:

Buy