WH Smith Posts £76m Profit Fall as Airport Rents Bite

Headline profit before tax fell to £76 million from £108 million at WH Smith (LON:SMWH), the retailer reported on Thursday, even as revenue rose 5% to £1.6 billion. Diluted earnings per share also declined, and the quarter produced a loss of GBX 68.70 per share. The market's verdict was swift: shares dropped GBX 28.60 to GBX 398.60 by midday, on volume of 10,128,259 shares — nearly triple the average of 3,512,205.

What drove the profit drop?

Higher rents on renewed U.K. airport contracts reduced the 2026 margin by roughly 230 basis points. A further 30–50 basis-point impact is expected in 2027. Management expects U.K. trading profit to be broadly flat next year as cost savings offset some of the pressure.

The company's profitability metrics reflect the strain. Return on equity came in at negative 90.46%; net margin was negative 9.48%. Fiscal 2026 absorbed £164 million of non-underlying charges, with about £40 million of related cash outflows expected in 2027.

How is the balance sheet holding up?

Free cash flow reached £52 million. Year-end net debt stood at £325 million, with leverage at 2x after the June equity raise. The stock's valuation metrics frame the picture: a market capitalisation of £599.89 million, a P/E ratio of -4.12, a PEG ratio of 2.65 and a beta of 0.93. The debt-to-equity ratio sits at 846.40, with a quick ratio of 0.42 and a current ratio of 0.33. Shares have ranged from a one-year low of GBX 345.60 to a high of GBX 710, trading below both the 50-day moving average of GBX 393.96 — marginally above it, in fact — and well below the 200-day average of GBX 488.03.

What is the early trading signal for 2027?

In the first 10 weeks of the new financial year, group like-for-like revenue was flat. Total revenue grew 1% at constant currency. Management said it remains cautious and guided to 2027 headline profit before tax of £75 million–£85 million — a range whose midpoint sits below the £76 million just reported.

What changes in North America?

Management plans to reshape the North American estate by closing around 100 stores and opening around 100, with a greater focus on Travel Essentials. The targets are ambitious: medium-term revenue growth of 20% and margin improvement from 3% to 8%. The company notes these are management targets that depend on successful execution of the transformation.

How did analysts respond?

Three research firms adjusted their numbers in mid-September:

• Berenberg Bank lifted its price objective from GBX 420 to GBX 440 with a "hold" rating, on Thursday, September 17th.
• JPMorgan Chase & Co. lowered its target from GBX 575 to GBX 550, keeping an "overweight" rating, on Thursday, September 17th.
• Canaccord Genuity cut its target from GBX 555 to GBX 535 with a "buy" rating, on Wednesday, September 16th.

Across the coverage, three analysts rate the stock a Buy and four a Hold. MarketBeat data shows a consensus rating of "Hold" with an average target price of GBX 566.43 — some 42% above the current trading price, a gap that captures both the discount and the doubt.

WH Smith operates in two segments, Travel and High Street. The Travel arm runs stores in airports, hospitals, railway stations and motorway service areas, selling news, books and convenience goods. The High Street segment sells stationery, greeting cards, art and craft, gifting products, newspapers, magazines, confectionery, drinks and books, in the U.K. and internationally.

The takeaway in plain words: the travel-led strategy is still generating growth, but airport rent resets and a North American reset have pushed profits down for now, and management's own guidance offers little room for error in 2027.