Market's view on Wh Smith

Published on April 2024

  • Some stock watchers expect earnings to be heavily weighted towards the second half (H2) of the year, anticipating maintaining a forecast of approximately 80p per share.
  • Concerns are raised about the feasibility of meeting the full-year pre-tax consensus without an extraordinary second half.
  • The share price is noted to be volatile, with advice to revisit in a few days to see if it stabilises.
  • There is criticism about the number of store closures in the US, suggesting a potential risk of prioritising expansion over quality.
  • Significant changes in store forecasts between financial reports are worrying some investors, particularly the increase in planned closures and the £9m exceptional charge to impair non-current assets.
  • The company is perceived by some as undervalued, with confidence in its activities reflected by turnover at an all-time high and plans to open over 100 new outlets.
  • While there’s a high level of debt, it is expected to decrease, and there’s a potential return of approximately £100m in pension surplus.
  • The company’s reliance on leased locations contributing to a £1 billion net debt is seen as a potential risk, reminiscent of other UK retail failures in the US.
  • The company is identified as a potential takeover target, especially due to its valuable travel store locations.
  • Discussion includes comparisons with other companies and their financials, highlighting concerns over the company’s forward price-to-earnings ratio and the necessity to close unprofitable stores.
  • Frustration is expressed over the company’s financial direction, with suggestions that the company should be sold if significant value can’t be realised.
  • The financial situation is complicated by large lease liabilities and the need to refinance substantial borrowings by 2026.
  • Mixed reactions to the company’s latest financial results, with some disappointment over the North American performance.
  • The stock price’s recovery potential is questioned, despite a growth narrative supported by global expansion and investments in new stores.
  • There is anticipation for the upcoming trading update just before the peak summer travel season.
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