- Strategic Reset Completed Transitioned to pure-play travel retailer by disposing of non-travel businesses and exiting unprofitable North American stores.
- Revenue Growth with Profit Decline Total revenue rose 5% to £1.6 billion, but headline trading profit fell 6% to £159 million, with EBITDA at £187 million.
- North America Profit Recovery Division reported £15 million profit in FY25 (6.5% margin) and aims to rebuild to 7-8% margin in 2026 through Travel Essentials focus.
- Store Optimization Strategy Net store growth of 28 in FY25 (78 opened, 50 closed), with 50-60 closures and openings planned in FY26 to prioritize quality over quantity.
- UK Division Strong Performance Revenue up 5% to £834 million, trading profit increased 7% to £130 million, with a £90M capital program for airport terminal expansion.
Segment Performance
The North America division reported a headline trading profit of £15 million, impacted by a net reduction in supplier income and costs related to inventory management. The U.K. division had a good year, with revenue up 5% to £834 million and headline trading profit up 7% to £130 million. The Rest of the World division is expected to grow and build scale in core markets, particularly in Australia, Ireland, and Spain.
Outlook and Guidance
The company expects total revenue growth in the region of 6% to 8% in the year ahead, driven largely by space, and profitability growth, with headline trading margin expected to grow from 4% in full year '25 to around 7% or 8% in full year '26. The U.K. trading profit margin is anticipated to be 14-15%, North America 7-8%, and the Rest of the World around 5%.
Valuation and Returns
With a P/E Ratio of -5.57 and an EV/EBITDA of 9.04, the market seems to be pricing in a challenging near-term outlook for WH Smith. The company's ROE is -62.07%, and ROIC is -141.05%, indicating significant challenges in generating returns on equity and invested capital. However, the Dividend Yield is 4.45%, which may be attractive to income-focused investors.
Operational Focus
WH Smith is focusing on improving space quality to optimize profits, closing as many stores as it opens in the short term. The company is also prioritizing business opportunities based on returns and ensuring group hurdles are met for each store. In North America, the company will focus on improving and investing in the core Travel Essentials business and reviewing the existing store portfolio.
Margin Potential
The company expects to improve margins in North America, with a medium-term margin potential of 7-8%, driven by mix shift towards Travel Essentials and away from InMotion and Resorts. The Rest of the World division is expected to improve EBIT margins and deliver stronger returns, with a long-term margin potential above 5%.