WH Smith Plc slumps 10% on results: is this a buying opportunity?

Should I add WH Smith Plc (LON:SMWH) (SMWH.L) to my portfolio?

WH Smith
WH Smith

The share price of WH Smith Plc (LON:SMWH) (SMWH.L) has fallen by as much as 10% today after the company released full year results for the year to 31 August 2018.

They show continued strong growth from its Travel division. Its trading profit grew by 7%, with it now accounting for two-thirds of the company’s profits. The segment’s performance has been boosted by the company’s ongoing investment in stores, as well as growth in passenger numbers.

The performance of the Travel segment helped to offset the 3% fall in High Street trading profit. It has experienced challenging trading conditions which weighed on its performance. The company has conducted a business review in order to ensure that the High Street business has the right long-term growth strategy.

WH Smith’s international business has continued to grow. It has won 42 new units in the year, which includes some significant tenders in South America and Europe. With 286 units operating across 27 countries, the company’s international growth prospects appear to be improving.

Clearly, the outlook for the company’s High Street business seems to be relatively uncertain. The prospects for the UK economy remain tough to predict, with there still being the potential of a no-deal Brexit. Even if a deal is struck, the unprecedented nature of Brexit could mean that weak consumer confidence remains in place over the coming months.

In spite of this, I think that WH Smith could have long-term investment appeal. Its Travel business appears to offer robust growth prospects, while its increasing exposure to international locations could help to diversify the business further. This could create a more appealing risk to reward ratio over the long run.

Therefore, while share price volatility could be ahead for the company in the near term, in the long run I’m optimistic about its total return potential.

About Robert Stephens 5430 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email info@investomania.co.uk or use one of the other contact methods available on the 'Contact Us' page