WH Smith (LON: SMWH) shares really depend upon the travel market. That makes sense, given that Smith’s itself says that it’s a travel retailer. So, you know, Homer and his D’Oh there. But this then moves on to the travel market is changing, significantly, post pandemic and lockdown. And that change is what is going to determine how well a travel retailer does. This is all simple enough logic but something that does need to be considered.
WH Smith is telling us that lockdown’s effect upon footfall is fading: “As we approach the peak trading period in Travel, the business continues to perform strongly across all our key travel markets, with total Travel revenue in the 13 weeks to 27 May 2023 up 31% versus the prior year. As such, since our announcement on the 20 April, our expectations for the full financial year have further improved.” and that important point “the ongoing recovery in passenger numbers.”
So, that’s good. They’ve also been able to refinance the working capital: “The Group's existing £363m lending facilities, consisting of a £250m revolving credit facility ('RCF') and a £113m term loan have been cancelled and repaid. This repayment is funded by drawings under new facilities consisting of a £400m RCF (the 'New RCF'). The New RCF is a sustainability linked loan finance facility.” So, they’re looking pretty good then.
WH Smith share price from Google Finance
We’d expect the next trading update to be toward the end of this month - 31 August would be a good bet on that date. So, what do we think this will depend upon?
Well, it is true that passenger numbers are back up. But the blend of them has changed. The short haul and leisure airlines are as full as they ever were - the long haul business traffic seems not to have come roaring back. Zoom’s taking the place of some of that.
Much the same is true on the railways. Work from Home is really rather killing commuter traffic - season tickers are down at least 20% on some lines. But leisure travel has risen strongly. So much so that one rail operating company now schedules maintenance for Fridays rather than weekends because that’s when the traffic is the least.
OK, so footfall is back up then. But the passenger mix has changed rather a lot. At which point, well, who does WH Smith make more money off? The regular commuter with ingrained habits? Or the leisure traveller stocking up for a treat of a ride? This isn’t one of these things it’s possible to work out entirely by logic, We can have views, of course we can, but proof is really only going to come from the results themselves. So, what’s the opinion?