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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 nasty yr 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 performed. However traders do have motive to be optimistic within the yr 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 performed a great 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 seem like good strikes to me and I feel the journey enterprise appears to be like promising.
Within the yr that led to August, the corporate registered total gross sales progress of seven% with nearly all of this coming from greater like-for-like gross sales. That’s an honest end result.
The accounting irregularity within the US enterprise nonetheless, meant income fell in the course of the yr. However traders 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 comparable income progress and revenue margins from the US division are anticipated to double. These are encouraging indicators.
It’s value noting although, that the enterprise has made a gradual begin to the yr. 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 obtainable – this may need been proper up his road.
Traders although, can believe within the accuracy of the agency’s numbers and this hasn’t been assured of late. And it’s extraordinarily necessary from an funding perspective.
Funding evaluation?
The newest decline implies a price-to-earnings (P/E) ratio of round 15. There are positively cheaper retail shares obtainable, however they often face greater aggressive pressures.
Journey retail’s shielded from a number 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 traders can ignore, no less than in the interim, is the 5% dividend yield. In its newest replace, the corporate’s lower its closing cost by 73%.
That is in step with the agency’s common coverage for shareholder returns. However a consequence of restating its earnings during the last couple of years is the dividend is ready to fall.
2026 and past
I feel 2026 is prone to be a yr of consolidation for WH Smith. The problems it’s been coping with are actual and severe and I anticipate the share value to mirror this.
Because of this, I don’t assume it’s a high alternative for traders proper now. I personal the inventory in my portfolio and I’ll be monitoring the scenario, however I’m different alternatives proper now.
