WH Smith's EPS Miss: A Closer Look at the Travel vs. High Street Divide

WH Smith's Full Year 2024 earnings report revealed an EPS miss, raising questions about the factors contributing to this shortfall. A closer examination of the company's performance reveals a significant disparity between its Travel and High Street divisions, which has impacted overall earnings.

WH Smith's Travel division has consistently outperformed its High Street counterpart in recent years. In fiscal 2024, Travel revenue surged 11% to £1.6 billion, with profits up 16% to £189 million. Meanwhile, High Street profits remained flat at £33 million on a 4% sales decline to £452 million. This trend is consistent with the past few years, with the Travel division now roughly three times the size of the High Street business.

The contrasting performance between the Travel and High Street divisions has significantly influenced WH Smith's overall earnings and profitability. The Travel division's strong performance has driven the company's overall earnings, with total group revenue up 7% and profit before tax rising 16%. However, the weaker High Street division's flat profits and sales decline highlight the need for a clear strategy to manage space and maximize returns, as stated by the company.

WH Smith's aggressive expansion in U.S. airport bookstores has contributed to its overall earnings growth. In fiscal 2024, sales in the U.S. reached £401 million, with over 90 new stores planned, including around 60 in North America. This growth is part of WH Smith's strategy to focus on its Travel division, which is now roughly three times the size of the High Street business. Despite a miss in EPS expectations, the company's aggressive expansion in the U.S. is a key driver of its earnings growth.

The shift in consumer spending patterns, particularly the decline in travel-related expenses, may have played a significant role in WH Smith's EPS miss. According to the Office for National Statistics, consumer spending on travel and tourism in the UK decreased by 2.5% in the year to August 2024 compared to the previous year. This decline in spending may have affected WH Smith's High Street division, which relies more heavily on local consumer spending.

In conclusion, WH Smith's EPS miss can be attributed to the contrasting performance between its Travel and High Street divisions. While the Travel division has driven overall earnings growth, the weaker High Street division's flat profits and sales decline highlight the need for a clear strategy to manage space and maximize returns. The shift in consumer spending patterns, particularly the decline in travel-related expenses, may have also contributed to the EPS miss. Investors should consider these factors when evaluating WH Smith's future earnings potential and the impact of changing consumer spending patterns on the company's performance.