WH Smith profits to be slightly ahead of target

25th Jan 2017 07:45

(ShareCast News) - As WH Smith embarks on an uncertain 225th year, the stationer expressed confidence about 2017 as sales have grown and it expects profit to be "slightly" ahead of expectations thanks mainly to its outlets in stations and airports.For the 21 weeks ended 21 January, like-for-like sales were up 1% and total sales rose 2%, compared to last year.The company expects good profit growth for the year due to the travel business, following investment and continued growth in passenger numbers, particularly in airport stores over the Christmas period.In travel, like-for-like sales were up 5% and total sales increased 10%, of which 3% relates to foreign exchange benefits.However, for like-for-like sales for high street stores were down 3% with a 4% fall in total sales following last year's strong sales, offset partially by sales of seasonal stationery and spoof humour books.In 2017, the company is to commemorate opening its first store in 1792, and chief executive Stephen Clarke said that "while there is some uncertainty in the broader economic environment", it remains confident that it is "well positioned for the year ahead as we continue to focus on profitable growth, cash generation and investing in new opportunities".The gross margin was up year-on-year and the company's cost efficiency programme is on track. WH Smith opened 32 Post Offices in the period, giving a total of 145 within the High Street division, plus a further 23 in the pipeline.The FTSE 250 company has also agreed to a new five-year revolving credit working capital facility of £140m.Nick Bubb, retailing analyst and consultant, said: "How far the 225th anniversary celebrations of the company help trade this year remains to be seen, but the City will be relieved by the strong Christmas trading performance."Meanwhile, analysts at Peel Hunt upgraded WH Smith to 'buy' at 1,800p and upgraded the company by £2m to £138m."So far so good for WH Smith in its new financial year, LFL, especially in travel, is nicely ahead of expectations and forecast momentum persists (full year up 2%). We felt that the late summer's 5% LFL in travel would prove to be hard to emulate but after 21 weeks of 2017, LFL has remained at the same level."Peel Hunt said with the shares trading on about 14 times the price-earnings ratio they looked "decent value for a very solid business with more growth prospects than the market thinks".