WH Smith downgraded as broker sees depressed travel footfall for prolonged period

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WH Smith PLC (LON:SMWH) has been slapped with a downgraded from RBC Capital Markets as UK consumers still remain cautious about overseas travel despite recent vaccine news.


Analysts at the Canadian bank downgraded the retailer’s shares to ‘sector perform’ from ‘outperform’ but lifted its price target on the shares to 1,400p from 1,150p.


Earlier this month, the FTSE 250-listed group reported a GBP280mln annual loss before tax, compared to GBP135mln profit a year ago. It said continued investment was being made in new shops and store formats in the UK and North America to grab market share once the pandemic is over.


RBC analysts view WH Smith as having a good management team and see the longer-term prospects for travel as attractive, but analysis of industry data and surveys suggests a “likely long drawn out recovery”.


Surveys also suggest UK consumers have become slightly more cautious on the prospects for travel since the summer, while WH Smith’s High Street and UK Rail business are seen as “more mature” than its airports arm.


“With Covid-19 global in nature and some likely ongoing consumer concern about travel, we expect passenger footfall to be down for a prolonged period but conversion in store and average spend per passenger up,” the analysts wrote in a note to clients on Tuesday.


“We expect domestic travel to recover first and, as in previous crises, the more price sensitive leisure sector to recover before business travel.”

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