In a statement released last Thursday, WHSmith PLC, has given no early indication that its travel retail sales will be significantly affected by airport VAT scam accusations made by The Independent newspaper two weeks ago.

 

WHSmith PLC says it will announce preliminary results for the year ending 31 August 2015 on Thursday, 15 October 2015, however prior to its close period, the company has issued the following pre-close update.

 

“During the second half Travel continued to deliver a strong performance with good sales across all of our core channels reflecting continued investment in our key business initiatives and growth in passenger numbers.”

 

“In addition, the new store opening programme both in the UK and overseas is on track.”

 

Referring to its pricing structure, which has attracted much criticism in recent weeks, it says: “We continue to deliver gross margin improvements and planned cost savings in line with our profit focused strategy.”

 

According to The Independent, retail analysts suggest ‘the passenger revolt’ sparked by allegations that airport retailers – such as WHSmith – were not passing VAT savings on to customers, would probably cost WHSmith ‘a fairly small sum’. The publication defines this ‘small sum’ as a couple of million pounds at most.

 

However, if the company is forced to rethink its pricing structure (and to decide to pass its VAT savings on to its customers in the future) at airport stores, bowing to pressure from disgruntled passengers and comments from the UK government, the company could see a more meaningful difference in its financial results.

 

Prior to the media storm, in June the company’s total travel retail sales were up 8% in the period with like-for-like sales up 4%.

 

In its HY1 (six months to February 2015) financial presentation WHSmith PLC said it will continue to invest in its travel retail stores and that its ‘travel trading profit’ reached £32m ($50m) in the six months to February 2015, up 7% yoy.

 

The company says that there are 25 new units planned for the UK this year and that 15 new international units were won in HY1. A total of 155 international units are now open.

 

HY1 revenue reached £237m  ($371m) +3% (like-for-like), outpacing the High Street considerably (-4% LFL).

 

In its HY1 presentation the company admits that travel retail space ‘is expensive and complex to manage’ so its focus in on the productivity of every ‘store metre’.