WH Smith travel business drives revenue growth however shares stay in red

WH Smith PLC (LON:SMWH) have reported “good” performance in their trading update on Wednesday, however shares are still in red.

Shares in WH Smith trade at 2,480p (-2.36%). 22/1/20 10:36BST.

The high street reader said that revenue growth in the 20 weeks period ending January 18 was 7%, however like for like revenue fell by 1%.

WH Smith noted that high street business revenue fell by 5% on both a reported and like for like basis, which will worry shareholders.

Gross margin was ahead of expectations however, and WH Smith said that they intend to identify further savings of £3 million.

The travel business bloomed for the firm, as revenue growth of 19% was reported. This was driven by the acquisitions of Marshall Retail Group and InMotion.

MRG was bought in October for £312 million, with InMotion purchased a year earlier for £198 million.

Excluding the two deals, WH Smith in their travel sector still achieved revenue growth of 5% across travel overall which was impressive looking at the volatility of the airline and holiday market.

Carl Cowling, Group Chief Executive said:

“We are pleased with the progress the Group has made in the first 20 weeks, with total revenue up 7%.

“During the period, we completed the acquisition of MRG ahead of plan and integration into the Group is progressing well. This acquisition is in line with our strategic focus to grow Travel, almost doubles the size of our International Travel business and accelerates growth in the US, the world’s largest travel retail market. Since announcing our intention to acquire the business, we are delighted to have won a further 8 new units in the US.

“In UK Travel, we have seen continued growth across all our key channels and we are on track to open a new flagship pharmacy format at Heathrow Terminal 2 this summer.

“Our High Street strategy continues to deliver through continued gross margin gains and tight cost control.

“Throughout this busy trading period, it is our colleagues, particularly across our stores, who work tremendously hard and I would like to take this opportunity to thank them. Without the continued support of our fantastic team we would not be able to achieve these results.

“Looking ahead, we are on track for the current year and as we continue to grow our share of the global travel retail market, the Group is well positioned for the years ahead.”

WH Smith and Marshall Retail deal

In October, the firm announce that it had agreed to buy US based Marshall Retail for a reported $400 million.

The deal will be financed by a combination of new debt and equity, with £155 million being raised from equity placing.

Additionally, a £200 million term loan facility will help fund the move with completion expected in the first quarter of 2020.

Michael Wilkins Marshall Retail Group CEO was optimistic about the move saying

“I feel very proud to announce that we have reached an agreement with UK based retailer, WH Smith, to acquire Marshall Retail Group. WH Smith is one of the world’s oldest retailers with close to 1,600 stores across the world.This is an incredible milestone for our business and is testament to the outstanding team at MRG. We are proud of our success, particularly our recent growth in airports, and I’m especially excited about the potential this unlocks for MRG in the years to come”

WH Smith have done well considering the state of the British retail market. Despite shares being in red on Wednesday, shareholders should remain optimistic across 2020.

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