Stock of the day 12/10/2015 – WH Smith PLC

Whilst it may come as a surprise (despite the store’s ubiquity) WH Smith is in the middle of an all-time high hitting year.

Can it have a happy ending to its latest chapter, as it announces its full year 2015 results on Thursday?

Interestingly for WH Smith, things aren’t completely perfect; yet the company is making it work regardless. What that means is, despite a troublesome high street performance, strong margins and impressive ‘travel’ stores (i.e. those in airports and train stations) sales have ensured the stock keeps hitting new peaks in 2015. For example, after opening the year at £13.43 the stock spiked to £14 for the first time with a 7% jump in total travel outlet sales compensating for a 5% fall in the high street division. Similarly, a 1% drop in total group sales was brushed over as the company affirmed that its ‘initiatives to grow gross margin continue[d] to deliver’.


(Source: IT-Finance.com 12/10/2015)

WH Smith soon fell away from that £14 peak, and by the start of April was back at £13; however, a surge in the run up to its half year interim results in the middle of April saw it climb to new highs. Those results contained a 4% increase in its half-year profits to £72 million and a 10% rise in diluted earnings per share to 50.8p, again with a 7% improvement in travel division sales making up for the 5% fall in its high street sales, leaving total group sales flat.

The (almost universal) Tory election victory bump helped WH Smith carry on its post-results push, and by June the stock had surpassed the £15 mark. Its third quarter trading update at the start of June then finally saw its travel division outperform its high street stores (the former up 8% compared to the latter’s 4% decline) by enough to allow for a 1% increase in total group sales, with a note made of the successful launch of the company’s new ‘Food to Go’ range.

Despite a brief wobble in the second half of June, WH Smith soon was back in ascendance, and hit its 2015, and all-time, best of £16.36 in the middle of July. Since then things have been a bit more mixed. Comments towards the end of August that the company’s full year sales would be higher than expected unfortunately got lost in the fray of the post-Black Monday chaos, seeing the stock loiter just either side of £15 for the rest of August and most of September. A foray back to the £16 then didn’t last long, as higher oil-price related declines in the travel sector had a knock-on effect for WH Smith’s stock, taking it to a current trading price of £15.19 (IT-Finance.com, 12/10/2015).

In terms of its full year results on Thursday, analysts are expecting the company to post a 7% increase in pre-tax profits to £122 million alongside flat revenue at £1.1 billion as stronger than usual high street sales (due to the likes of ‘Grey’ and ‘Go Set a Watchman’) join a typically robust travel division performance.

WH Smith has a consensus rating of ‘Hold’ with an average target price of £15.16.