Shares in WH Smith tumbled by more than 4% this morning after the newspaper, book and stationery chain said that both its High Street stores and Travel stores reported a drop in revenues.
The retailer's shares fell by 21.5p to to 500.5p after it said like-for-like sales at its high street division fell by 4% in the 18 weeks to July 2, compared to the same period last year. The travel business, which operates from outlets at airports, train stations and motorway service areas, saw like-for-like sales dip by 2%.
Although WH Smith said its strategy of cutting costs and improving gross margins was paying off, it warned that the economic environment remains uncertain.
Nick Bubb, an analyst at Arden Partners, said: "Today's IMS (interim management statement) is on track for the full year and it is the same old story: sales down, margins and profits go up and the cash machine rolls on. Given the soft comps in Travel, because of the Icelandic ash cloud in spring 2010, we'd hoped for a bit more than -2% LFL in this key division."
"[However] Given the strategic value of the airport shops, the decent dividend and the awesome cash generation, the shares still look very attractive, despite the pick-up to 522p yesterday, and we have our long-standing 550p price target under review."
