WHSmith, the high street and travel retailer, has said it expects a full-year loss of up to £75m and plans to axe 1,500 jobs as coronavirus depresses passenger numbers at airports, railway stations and other transport hubs.
“As a result of the impact on passenger numbers and lower footfall on the UK high street, we have taken the difficult decision to review our store operations across both our travel and high street businesses,” the FTSE 250 company said in a statement on Wednesday.
The news comes after electricals group Dixons Carphone said it would shed 800 roles as it reorganises store management and amid expectations that redundancies in retail will pick up as the UK government’s job support scheme during the pandemic starts to wind down.
The bulk of the job cuts at WHSmith will fall on the travel division, which generates more than three-fifths of the group’s profit. Revenue there was down by more than 90 per cent in April and May, and though some larger stores have reopened in both the UK and the US, sales were still 75 per cent lower in July.
“While we are beginning to see early signs of recovery in some of our markets, the speed of recovery continues to be slow,” said Carl Cowling, who took over from Stephen Clarke as chief executive last November and whose tenure has so far been dominated by the pandemic response.
WHSmith expects that sales in the US travel division, where air travel is primarily domestic rather than international, will recover quicker. Revenue from the 147 stores that have reopened there is down roughly 50 per cent, though overall revenue in the US is down 80 per cent — a similar number to that reported on Tuesday by Hudson News, one of its main rivals in US travel.
The company has invested significantly in US expansion in the past two years, acquiring InMotion and Marshall Retail Group for a total outlay of more than £450m.
The performance on UK high streets was better, helped by the presence of Post Office counters in more than 200 stores that remained open during the lockdown. July sales there fell by a quarter, having been down 71 per cent in April. All of the 575 high street stores have now reopened.
The guidance for a full-year loss of between £70m and £75m contrasts with analysts’ forecasts prior to the pandemic for a headline pre-tax profit of about £170m. Like many retailers, WHSmith has already suspended dividends and share buybacks.
The group raised fresh equity in April, so its balance sheet remains relatively healthy, with net cash of £63m, undrawn bank facilities of £320m and confirmed eligibility for the UK government’s Covid Corporate Financing Facility.
Given an estimated monthly cash burn of £15m to £20m, and the estimated £15m to £19m one-off cost of the job cuts, the group said it “has sufficient funds to allow it to operate throughout a prolonged downturn in our markets”.
Shares in the group, star performers among retailers until this year, were 4 per cent higher in early trade on Wednesday, though they have still more than halved so far in 2020.