WH Smith has become the latest company to issue a profit warning because of the coronavirus pandemic, which has led to a major drop in shoppers at its airport outlets.
The retailer’s shares dropped 15% to £13.39 as it warned that the virus outbreak would cost it up to £130m in lost revenues. It said annual profits were likely to be £30m-£40m lower than previously expected. This in effect halves its profit forecast of nearly £80m.
Some analysts warned the impact could be even worse, after the US president banned most travel from the EU to the country for 30 days. The restrictions will not apply to US citizens or travellers from the UK.
The books and stationery store chain flagged a “significant impact” on its shops at airports in the Asia Pacific region, which account for 5% of its travel division’s revenues.
The World Health Organization is recommending that people take simple precautions to reduce exposure to and transmission of the coronavirus, for which there is no specific cure or vaccine.
The UN agency advises people to:
- Frequently wash their hands with an alcohol-based hand rub or warm water and soap
- Cover their mouth and nose with a flexed elbow or tissue when sneezing or coughing
- Avoid close contact with anyone who has a fever or cough
- Seek early medical help if they have a fever, cough and difficulty breathing, and share their travel history with healthcare providers
- Advice about face masks varies. Wearing them while out and about may offer some protection against both spreading and catching the virus via coughs and sneezes, but it is not a cast-iron guarantee of protection
Many countries are now enforcing or recommending curfews or lockdowns. Check with your local authorities for up-to-date information about the situation in your area.
In the UK, NHS advice is that anyone with symptoms should stay at home for at least 7 days.
If you live with other people, they should stay at home for at least 14 days, to avoid spreading the infection outside the home.
In the past fortnight, passenger numbers have dropped significantly at UK airports, where its shops represent 60% of travel revenues; in the US, which accounts for a quarter of travel revenues; and in Europe. WH Smith expects revenues at its UK airport shops to fall by 35% in March and April.
The pandemic could also affect high street spending in the UK, the retailer said, and would drag down its full-year revenues and profits.
Neil Wilson, the chief market analyst at the trading platform Markets.com, said: “You have to feel a little sorry for a company that has done a brilliant job of pivoting away from the struggling British high street to driving all its revenue and profit growth from airports and train stations.
“A rapid decline in footfall at travel sites because of coronavirus is hitting revenues and will result in a material decline in profits this year. Trump’s 30-day European travel ban makes things worse and threatens to make today’s estimates only partially reflective of the level of damage that could be done this year.”
In the six months to 29 February, WH Smith posted a 1% drop in like-for-like revenues. Travel revenues were up 2%, while high street income fell 4%.
Last May it was rated the UK’s worst high street retailer by consumers for the second year in a row in a Which? survey. Shoppers accused it of having “untidy stores” and offering “poor value for money”.
