WH Smith has become the latest company to issue a profit warning because of the coronavirus pandemic, which has led to a major drop in shoppers at its airport outlets.
The books and stationery store chain flagged a “significant impact” on its shops at airports in the Asia Pacific region, which account for 5% of its travel division’s revenues.
The World Health Organization is recommending that people take simple precautions to reduce exposure to and transmission of the Wuhan coronavirus, for which there is no specific cure or vaccine.
The UN agency advises people to:
- Frequently wash their hands with an alcohol-based hand rub or warm water and soap
- Cover their mouth and nose with a flexed elbow or tissue when sneezing or coughing
- Avoid close contact with anyone who has a fever or cough
- Seek early medical help if they have a fever, cough and difficulty breathing, and share their travel history with healthcare providers
- Avoid direct, unprotected contact with live animals and surfaces in contact with animals when visiting live markets in affected areas
- Avoid eating raw or undercooked animal products and exercise care when handling raw meat, milk or animal organs to avoid cross-contamination with uncooked foods.
Despite a surge in sales of face masks in the aftermath of the coronavirus outbreak, experts are divided over whether they can prevent transmission and infection. There is some evidence to suggest that masks can help prevent hand-to-mouth transmissions, given the large number of times people touch their faces. The consensus appears to be that wearing a mask can limit – but not eliminate – the risks, provided it is used correctly.
In the past fortnight, passenger numbers have dropped significantly at UK airports, where its shops represent 60% of travel revenues; in the US, which account for 25% of travel revenues; and Europe. WH Smith expects revenues at its airport shops globally to fall by 35% in March and April.
The outbreak could also affect high street spending in the UK, the retailer said, and would drag down its full-year revenues and profits.
The company warned that revenues would be £100m-£130m below its full-year forecast, while profits before tax were likely to be £30m-£40m lower in the 12 months to 31 August. Last year, it posted a pre-tax profit of £155m.
Some analysts warned the impact could be even worse, after the US president banned most travel from the EU to the country for 30 days. The restrictions will not apply to US citizens or travellers from the UK.
Neil Wilson, the chief market analyst at the trading platform Markets.com, said: “You have to feel a little sorry for a company that has done a brilliant job of pivoting away from the struggling British high street to driving all its revenue and profit growth from airports and train stations.
“A rapid decline in footfall at travel sites because of coronavirus is hitting revenues and will result in a material decline in profits this year. Trump’s 30-day European travel ban makes things worse and threatens to make today’s estimates only partially reflective of the level of damage that could be done this year.”
In the six months to 29 February, WH Smith posted a 1% drop in like-for-like revenues. Travel revenues were up 2%, while high street income fell 4%.
Last May it was rated the UK’s worst high street retailer by consumers for the second year in a row in a Which? survey. Shoppers accused it of having “untidy stores” and offering “poor value for money”.
