WH Smith expects to burn through up to £20million a month between now and March, as the national lockdown rolls on.
In December, the retailer’s sales across its travel arm were 36 per cent of levels seen back in 2019, before the pandemic struck.
During the five months to 16 January, WH Smith’s sales were 46 per cent of levels seen the previous year.
Cash burn: WH Smith expects to burn through up to £20million a month between now and March
But, WH Smith said it enjoyed better than expected sales over Christmas, with sales up to 92 per cent of 2019 levels.
Shares in FTSE 250-listed WH Smith jumped sharply this morning and are currently up 6.24 per cent or 97p to 1,652p. A year ago, the company’s share price was 2,548p.
Carl Cowling, chief executive of WH Smith, said the pandemic continued to have a ‘significant’ impact on the business, which looked set to continue over the coming months.
The stationary and book seller said sales in January had been 46 per cent of the same period a year ago.
‘In our high street business, we worked hard to navigate our way through the evolving Covid restrictions as we approached the Christmas trading period’, Mr Cowling said.
He added: ‘This positioned us well, resulting in a better than expected Christmas with sales in December at 92% of 2019 levels. Our online businesses continued to deliver significant year-on-year growth in the period.’
On the issue of cash, Mr Cowling said: ‘We generated cash during November and December and ended December with a stronger cash position than anticipated with liquidity of £90m, which is materially ahead of our original plan.’
WH Smith said it had not experienced any disruption over the period due to the UK’s exit from the European Union. It does not expect Brexit to have a material impact on its ability to import stock in the coming year.
The retailer also announced the appointment of a new non-executive director today. Kal Atwal is joining the business as a non-executive director from 1 February.
Atwal spent 16 years at BGL Group and held several roles, including founding managing director of comparethemarket.com and group director responsible for brand-led businesses, group strategy and corporate communications.
He is currently a non-executive director at Royal London Asset Management, Admiral Financial Services, a subsidiary of Admiral Group, and chair of Simply Cook, a tech-enabled meal kit subscription service.
John Moore, an investment manager at Brewin Dolphin, said: ‘With a heavy reliance on travel, WH Smith is among the retailers most disrupted by the pandemic – compromising its previous status as one of the unlikely high street success stories.
‘However, the business has adapted well and is trading ahead of where many would expect it to be, with reasonable amounts of cash to see it through.
‘The faster recovery of its US business also underlines the importance of its 2018 acquisition of InMotion and, with that, geographical diversification. The key question for WH Smith is when and to what degree travel will return in the future, which remains the biggest risk the business faces.’
Impact: Sales across WH Smith’s travel sites continue to be hit hard by lockdown