Financial Trading Blog
Stock of the day 17/08/2015 – WH Smith PLC
Can the company’s robust run continue following its latest trading statement on Thursday?
After opening the year at £13.43 WH Smith had a fairly limp first quarter of trading, gradually declining to £13.08 at the start of April. However, the stock was soon rescued by some decent half year results, which saw the ‘bookseller’ (in quotation markets for reasons that are clear if you’ve been into one of its stores recently) post a 4% increase in profits to £72 million despite a 5% drop in sales, due to (clearly effective) cost-cutting measures by the company. Impressive growth from its travel division (i.e. airports and train stations), up 7%, was an extra sweetener, and helped the stock soar across April and May.
(Source: IT-Finance.com 17/08/2015)
The year’s mid-point brought with it another trading statement for WH Smith, one that pushed the company to a fresh high of £15.87 at the start of June. It saw a 1% rise in sales for the 13 weeks to the end of May, alongside another impressive quarter for its travel sector, which saw sales jump 4%. Whilst this news helped lift Smith’s to that aforementioned June peak, it couldn’t sustain this level throughout the rest of the month, as it ping-ponged between £15 and £15.50. By mid-July WH Smith had (briefly) regained its momentum to hit a fresh all-time high of £16.36 before tumbling back under £15.50 by the start of August.
The company had begun to bounce back as August got under way, re-approaching £16, before the news that companies like WH Smith had been pocketing the duty free VAT savings that are meant to be passed onto consumers caused the stock to swallow a spoonful of bad press. This took the edge off of WH Smith’s climb, leaving the stock at a current trading price of £15.76 (IT-Finance.com, 17/08/2015).
In terms of its impending trading statement, it will interesting to see whether WH Smith’s already strong travel sector growth improved across the holiday season, and if such an increase can compensate for any further declines in its high street store sales.
WH Smith has a consensus rating of ‘Buy’ with an average target price of £14.90.
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