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Shares in FTSE 250 journey retailer WH Smith (LSE:SMWH) fell 7% on Friday (19 December) after the agency reported its 2025 outcomes. It’s been a foul 12 months for the inventory, however is it set to bounce again in 2026?
The corporate has spent the final 4 months doing a radical job of tackling its points and there’s nonetheless extra to be carried out. However buyers do have motive to be constructive within the 12 months forward.
A turnaround story
Regardless of an accounting scandal that despatched the inventory down 34% in a day, WH Smith has had some real highlights in 2025. It’s carried out a superb job of focusing its enterprise on journey retail.
To this finish, the corporate has divested its excessive road shops and on-line greeting card operation. Each of those appear like good strikes to me and I believe the journey enterprise seems promising.
Within the 12 months that led to August, the corporate registered total gross sales progress of seven% with the vast majority of this coming from greater like-for-like gross sales. That’s an honest outcome.
The accounting irregularity within the US enterprise nonetheless, meant earnings fell in the course of the 12 months. However buyers do no less than have readability about the place the corporate is.
The place are we now?
By way of the place it’s heading, WH Smith’s steerage is for related income progress and revenue margins from the US division are anticipated to double. These are encouraging indicators.
It’s price noting although, that the enterprise has made a sluggish begin to the 12 months. Like-for-like gross sales progress’s fallen to three%, led by a weaker efficiency in UK prepare stations.
There’s additionally nonetheless some ongoing uncertainty. The corporate doesn’t have a everlasting CEO and it’s a pity Sir Dave Lewis isn’t accessible – this might need been proper up his road.
Buyers although, can trust within the accuracy of the agency’s numbers and this hasn’t been assured of late. And it’s extraordinarily vital from an funding perspective.
Funding evaluation?
The newest decline implies a price-to-earnings (P/E) ratio of round 15. There are undoubtedly cheaper retail shares accessible, however they often face greater aggressive pressures.
Journey retail’s shielded from a whole lot of competitors from different retailers and – extra importantly – e-commerce. That’s why WH Smith has been shifting its focus to this a part of the enterprise.
One factor buyers can ignore, no less than in the intervening time, is the 5% dividend yield. In its newest replace, the corporate’s lower its ultimate cost by 73%.
That is according to the agency’s basic coverage for shareholder returns. However a consequence of restating its earnings over the past couple of years is the dividend is about to fall.
2026 and past
I believe 2026 is prone to be a 12 months of consolidation for WH Smith. The problems it’s been coping with are actual and critical and I count on the share value to replicate this.
In consequence, I don’t suppose it’s a prime alternative for buyers proper now. I personal the inventory in my portfolio and I’ll be monitoring the scenario, however I’m different alternatives proper now.
