WH Smith H2 Earnings Call Highlights

WH Smith (LON:SMWH) executives used the company’s full-year results call to outline the impact of a strategic reset that has left the group as a “pure-play travel retailer,” while detailing a remediation plan following a Deloitte review and a renewed focus on returns and cash generation.

Strategic reset and remediation plan

Chair Annette Court said the year had been “busy” and that recent months had been difficult, but emphasized the group’s position in “attractive travel markets.” During the year, the company disposed of its High Street and Funky Pigeon businesses, leaving a travel-focused portfolio.

Management said it has reviewed the broader travel portfolio with “a sharp focus on profitable growth and an enhanced focus on return on capital.” In North America, the group is exiting a number of unprofitable fashion and specialty stores and conducting a store review of its U.S. InMotion business, with new InMotion openings to be considered only as part of “a strategically important tender package.”

Court said the Deloitte review led to a remediation plan built around three objectives:

• Strengthen governance and controls “to protect value and restore trust.”
• Embed aligned processes and ways of working across the group, supported by new systems.
• Sustain changes through cultural change, training, and monitoring.

She also said the company is searching for two non-executive directors, including one with North America retail experience, while the board continues its search for a new chief executive.

FY2025 results: growth in revenue, lower group trading profit

Group CFO Max Izzard said results were presented pre-IFRS 16 and on a continuing basis. Total group revenue increased 5% to £1.6 billion, with like-for-like revenue growth across all divisions. Headline trading profit fell 6% to £159 million, which management linked to its review of North America. Headline profit before tax was £108 million, and headline EBITDA was £187 million.

Headline net debt at year-end was £390 million, and the board proposed a final dividend of £0.06 per share, taking the full-year dividend to £0.173 per share.

In the 13 weeks to Aug. 31, group like-for-like revenue grew 3%. By division, the U.K. delivered 3% like-for-like growth, North America 1%, and Rest of the World 6%. Izzard said similar trends continued in the first 15 weeks of FY2026, with group like-for-like growth of 3% and the U.K. slowing slightly to 2% “largely reflecting a softening in Rail.”

North America review: supplier income, inventory, and margin reset

Izzard said North America delivered headline trading profit of £15 million. He provided a bridge from a previous market expectation of £55 million, including a net reduction in supplier income of £23 million (comprising a £33 million gross reduction, with £20 million deferred and £13 million not delivered), partly offset by a £13 million supplier income restatement benefit from prior years. Expected cost savings of £5 million related to the logistics and distribution network “were not delivered,” he said.

North America also recorded net inventory-related items of £12 million in FY2025, driven mainly by an increase in stock obsolescence provisions and a higher stock loss (shrinkage) provision. The company plans to narrow product ranges, clear aged stock, and enhance controls and stock management processes.

After restatements, North America headline trading margins were stated as 8.5% for FY2024 and 10.5% for FY2023. After removing certain one-off net benefits (including COVID-related rent relief and insurance claims), management said the normalized North America trading margin for FY2024 and FY2023 was “around 8%.”

Looking ahead, Izzard guided to a North America headline trading margin of around 7% to 8% in FY2026, up from 4% in FY2025, citing a mix shift toward Travel Essentials, the non-repeat of the £12 million inventory cost, about £5 million of supplier income deferral gains year on year, and offsets including operating model changes and remediation investment.

Divisional performance: U.K. strength, Travel Essentials emphasis, and Rest of World focus

In the U.K., revenue increased 5% to £834 million and headline trading profit rose 7% to £130 million. Interim Group CEO Andrew Harrison highlighted growth in food-to-go and Health & Beauty (up 20% year on year), as well as ongoing operational efficiencies to manage inflationary pressures. He said the company will execute its “largest ever store development program,” including expanding its “one-stop-shop” format across six more U.K. airport terminals, including Heathrow, though management expects some short-term disruption and margin dilution.

In North America, management said Travel Essentials continued to outperform. Travel Essentials grew 19% on a constant currency basis in FY2025 and increased to 55% of North America revenue, compared with 37% in 2022. The segment generates “around 10%” trading profit margin on a fully allocated basis, management said, and the group expects Travel Essentials to exceed 70% of North America revenue in the medium term.

InMotion, with 123 stores, was described as profitable overall but in like-for-like decline, with a more selective approach planned. Management expects the InMotion estate to contract by around 20% to 30% over time, reducing stores below 100 in the medium term. The Resorts business in Las Vegas is being reshaped, with the company exiting a number of unprofitable fashion and specialty stores, while reviewing lease terms and potential rationalization for other formats.

Rest of the World delivered revenue up 12% on a constant currency basis and 7% like-for-like, while headline trading profit was flat year on year due to operating investments and gross margin headwinds from location mix. Management said it will focus investment on core markets (including Australia, Ireland, and Spain), exit subscale markets, and increasingly pursue a franchise-led model. The company expects Rest of the World headline trading margin to remain “broadly stable” at about 5% in FY2026.

Cash flow, refinancing, and FY2026 guidance

Free cash flow was supported by £187 million of headline EBITDA and underlying CapEx of £81 million in FY2025. The company expects CapEx of about £90 million in FY2026, including significant spend related to Heathrow, JFK, and Orlando. Management also said it expects to close roughly 50–60 stores and open 50–60 stores in FY2026, with reductions focused on North America Resorts and InMotion and on certain Rest of the World markets.

Izzard also discussed refinancing of the convertible bond maturing May 2026, including $200 million of USPP notes and £120 million of bank term debt, plus a £200 million backstop facility. Finance costs for FY2026 are expected to be £33 million to £35 million, and the group expects headline net debt to be “in the region of £400 million” at FY2026 year-end.

For FY2026, the company guided to:

• Group revenue growth: mid-single digits (U.K. 3%–5%, North America 6%–8%, Rest of World 4%–6%)
• Headline trading profit margin: U.K. 14%–15%, North America 7%–8%, Rest of World ~5%
• Central costs: £30 million–£32 million
• Headline profit before tax (non-underlying items excluded): £100 million–£115 million

During Q&A, management said an FCA investigation had been launched and that the company would “fully cooperate,” noting it expected the process to take “quite some time,” without providing further detail on costs.

About WH Smith (LON:SMWH)

WH Smith PLC operates as a retailer in the United Kingdom and internationally. It operates in two segments, Travel and High Street. The Travel segment offers news, books, and convenience for travelling customers. It operates stores in airports, hospitals, railway stations, and motorway service areas. The High Street segment sells stationery products, including greeting cards, general stationery, art and craft, and gifting products; news and impulse products, such as newspapers, magazines, confectionery, and drinks; and books.