WH Smith investors sour on turnaround plans

WH Smith's shares plummeted for the second consecutive day after the retailer disclosed a significant decline in profits, causing alarm among investors. Boss Leo Quinn, who has a track record of successful turnarounds at Balfour Beatty and Qinetiq, blamed the company's current struggles on "forced growth" under previous leadership.

WH Smith reported a £76 million pre-tax profit in the year to August, which was more than a quarter lower than the previous year and much lower than the £115 million target initially set. The company incurred a £107 million loss on a statutory basis due to impairments, write-downs, and restructuring costs. Quinn acknowledged that there is a cost associated with his transformation plan, but he emphasized that it is necessary to fortify the company's foundations and boost profitability.

His strategy includes downsizing underperforming operations in Europe and the US and withholding staff and senior leadership bonuses. WH Smith plans to cut its revenue in the rest of the world division by 10-20% due to store closures, while North American sales are expected to slow as the group grapples with reduced footfall at airport stores, caused by travel disruptions from the Iran war.

The company is still grappling with the fallout from a major accounting scandal from last year, which led to the departure of the previous CEO and a significant drop in share price. Despite the challenges, analysts remain cautiously optimistic about Quinn's plan, although they believe there is still a year of significant work ahead to see tangible improvements in the company's financial performance.