WH Smith sales up 6% thanks to solid travel segment performance

WH Smith posted a rise in sales for the 20 weeks to 19 January on Wednesday as a solid performance from the travel business offset lacklustre high street trading.

Total sales were up 6% during the period, with like-for-like sales flat, as sales in the travel segment increased 16%, with LFL sales 3% higher. The company said it saw good sales growth across all of its key channels thanks to ongoing investment and gross margin was in line with plan.

It UK store opening programme is on track and it expects to open 20 new units this year. Meanwhile, WH Smith continued to roll out its new concept airport stores at Heathrow, with positive feedback from the landlord and customers.

The group said its integration of US travel retailer InMotion is progressing well and it sees good growth prospects both in the US and internationally from the format.

WH Smith's international business now has 420 units open, including 116 InMotion stores, across 28 countries and over 90 airports outside the UK.

The high street business saw total sales down 1% and LFL sales 2% lower during the period. WH Smith said it saw a particularly good performance in stationery, driven by good growth in Christmas cards, wrap, diaries and fashion stationery.

Chief executive Stephen Clarke said: "Looking ahead, whilst there is existing uncertainty in the broader economic environment, the group is well positioned for the year ahead and beyond."

At 0950 GMT, the shares were up 1.2% to 1,899p.

Neil Wilson, chief market analyst at Markets.com, said: "WH Smith continued the theme we’ve been seeing for some time. The High Street division is suffering but it’s been more than made up for by an excellent performance in travel.

"Under-investment in the rather sorry High Street side of the business should not detract from the fact that WH Smith is building a strong brand in travel that has significant room to grow overseas. This significantly reduces its exposure to the ailing UK high street - a strategy that increasingly looks like a masterstroke. While high street footfall is coming off, global air travel passenger growth is only growing rapidly. This leaves WH Smith well positioned for the next few years."

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "Not many bricks and mortar retailers are opening new outlets right now, but that’s precisely what WH Smith is doing.

"Those new stores are appearing in train stations and airports though, rather than on high streets and in shopping centres. That’s because a steady stream of commuters and holiday makers is a more reliable source of sales than high street shoppers, and has kept WH Smith heading in the right direction despite the woes currently afflicting the retail sector. Indeed the WH Smith travel business now accounts for around two thirds of the company’s earnings, and has delivered more than ten years of consecutive profit growth.

"The strategy of rolling out travel outlets has allowed the company to increase the ordinary dividend for investors every year since 2007, through the financial crisis and the recent turmoil blighting the UK retail sector, and that’s quite some feat. The success of the business model is baked into the stock price though, as WH Smith shares command a significant premium to its peers."