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WH Smith (SMWH) has upgraded its earnings forecast after reporting a 1% rise in like-for-like sales for the 21 weeks to 21 January as strong travel sales made up for the a downturn in high street trading as the adult colouring craze tailed off.

The retailer said it delivered a “strong performance” in the half-year period, with total like-for-like sales up 1% and total sales up 2% for the 21 weeks.

Travel like-for-like sales were up 5% with total sales up 10% - 3% of which relates to foreign exchange benefits from its international business.

High street like-for-like sales dropped down 3% with total sales down 4%. WH Smith said this reflected the annualisation of last year’s strong sales of colour therapy titles and was mitigated by strong promotions in seasonal stationery and sales of adult humour books.

Gross margin was up year on year on the high street and its ongoing cost efficiency programme is “on track”.

It opened an additional 32 post offices in the period, giving it a total of 145 and a further 23 post offices are due to open in the balance of the year.

CEO Stephen Clarke commented: “In travel, we have delivered good sales growth across all our key channels in the period. This was driven by ongoing investment in the business and continued growth in passenger numbers - particularly in our airport stores over the Christmas holiday period. In high street, we saw another good performance with sales in line with expectations driven by our new seasonal stationery ranges and spoof humour books.

“As a result of the performance in Travel we expect group profit growth for the year to be slightly ahead of plan.

“Looking ahead, 2017 is a significant year for us as we celebrate the 225th anniversary of our first store opening in 1792. While there is some uncertainty in the broader economic environment, we remain confident that the group is well positioned for the year ahead as we continue to focus on profitable growth, cash generation and investing in new opportunities.”

WH Smith shares have jumped 7.4% to 1,590p on the back of this morning’s news.

Morning update

The major news in the papers this morning is The Financial Times’ discovery that Tesco (TSCO) is facing new legal action over its 2014 accounting scandal from a US investment house seeking £100-£150m in compensation.

Tesco has lodged a “forceful defence” against the action, which comes as it is already fighting a separate lawsuit over the affair from Allianz Global Investors, Russell Investments and 110 other investors launched in October.

See this morning’s Media Bites here and the FT’s report (£) here.

Elsewhere, listed agriculture group Wynnstay (WYN) has delivered “satisfactory results in line with market expectations despite tough trading environment” in the full-year to 31 October.

Revenues fell from £377.4m to £368.1m during the year, hit by continuing deflation in many product categories for much of the period.

Sales from its agricultural division dropped to £249.7m from £270m, reflecting average lower unit values for most feed, seed, grain and fertiliser products, together with the reduced demand for dairy-related items. Specialist retail revenue grew to £118.3m from £107.2, largely driven by acquisitions.

Profit before taxation reduced by 12.6% to £7.3m, while underlying pre-tax profit was down 18.6% to £7.4m. The lower profits reflected a reduction in compound and blended feed volumes and the costs associated with new store openings and integration.

CEO Ken Greetham said: “Our results are in line with market expectations and reflect the tough trading environment, which stemmed from an imbalance in world markets and has led to low output prices for farmers, most apparent in the dairy sector. Despite the backdrop, we continued to invest significantly across the group to support efficiencies and future growth plans, and have further extended our trading reach in the South of England through our Wynnstay Store outlets.

“Over recent months, there has been a recovery in output prices for farmers, mainly as a result of the devaluation of Sterling, and the new financial year has started in line with management expectations. We remain optimistic of further improvement and are focused on continuing to develop Wynnstay’s market presence.”

On the markets this morning, the FTSE 100 has started the day strongly, up 0.7% so far to 7,197pts.

In addtion to WH Smith, gains have been recorded by Marks & Spencer (MKS), up 2.4% to 342.3p, Just Eat (JE), up 2% to 544p, Nichols (NICL),. up 1.2% to 1,605.6p and Reckitt Benckiser (RB), up 1.1% to 6,871p.

Early fallers include Real Good Food (RGD), down 5.3% to 33.15p, Crawshaw Group (CRAW), down 3.6% to 20p, Premier Foods (PFD), down 1.8% to 40.75p and Total Produce (TOT), down 1.5% to 153.3p.

Yesterday in the City

The FTSE remained unchanged at 7,150.3pts yesterday as it stemmed the recent downwards trend.

It was largely a tough day for the grocery and consumer goods sectors, led by PZ Cussons (PZC), which collapsed 11% back to 299.7p after updating the market yesterday on how economic conditions in its key African market of Nigeria have eaten into first half profits.

Grocery retailers also had a tough day, with Ocado (OCDO) down 3.1% to 253.3p, Sainsbury’s (SBRY) down 1.5% to 256p and Tesco (TSCO) down 1.5% to 192.2p.

Other major names on a downwards trend included Greencore (GNC), down 2.9% to 223.5p, Associated British Foods (ABF), down 1.5% to 2,485p and ahead of a trading update tomorrow SSP Group (SSPG), down 1.2% to 404.6p.

WH Smith had slipped 1.1% to 1,480p ahead of its first half trading update this morning.

One standout performer yesterday was Fevertree Drinks (FEVR), which was up yet another 6% to a record high of 6% after announcing higher than expected second half sales growth.

The better performers amongst major stocks were Imperial Brands (IMB), up 1.7% to 3,642p and Britvic (BVIC), up 1% to 588p.

Other fallers included McBride (MCB), down 2.9% to 159.8p, Martson’s (MARS), down 1.8% to 134.7p and Greene King (GNK), down 1.6% to 693p.

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