WH Smith has shrugged off the ongoing row about allegations that retailers are pocketing VAT savings after demanding boarding passes from airport passengers to upgrade its full-year earnings forecast on the back of booming travel sales.
The boarding passes row threatens WH Smith’s bottom line if it is either forced to pass on VAT savings to customers or a higher proportion of shoppers refuse to show their passes, but the impact thus far looks negligible. A pre-close update light on numbers said its travel business “continued to deliver a strong performance”, while high street sales were outperforming market expectations.
WH Smith said its full-year profits would be “slightly ahead of the consensus of analysts’ expectations”, but its shares still slipped 1.1% to 1,553p on Thursday morning. Besi analyst Tony Shiret suggested market caution over the shares may be misplaced. “While this may be a case of early days [for the VAT issue], sales and passenger mix both suggest the issue is less impactful in real life than in the press. We expect it to continue to feature in valuation debate for the time being, however.” Investec analyst Kate Calvert said the update was “reassuring” with travel “benefiting from recovery in UK regional air passenger traffic and air growth generally”.
Elsewhere, Dutch retail giant Ahold saw its shares jump 2.8% to €17.99 on Thursday morning after reporting a 4.8% jump in second-quarter sales (excluding petrol and at constant exchange rates). Ahead of its forthcoming merger with Delhaize, total sales were €8.7bn, up 17.1% (up 3.1% at constant exchange rates), while net profit rose 33% year on year to €195m.
Bernstein analyst Bruno Monteyne said the like-for-like growth represented “a solid beat across all three divisions”, with US market share up in volume and dollar terms. However, analysts at Morgan Stanley cautioned: “In the US, despite posting positive like for likes, Ahold continues to underperform its main competitors”.
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