WH Smith’s Australian operations could face new pressure as the travel retailer adopts a more cautious outlook, citing weakening passenger demand and consumer confidence linked to the conflict in the Middle East.

The UK-listed group, which operates 66 airport-based stores across Australia selling consumer electronics and travel essentials, warned that geopolitical uncertainty is weighing on performance in its international travel division with both Qantas and Virgin slashing flights.

Management said the outlook for the business will depend heavily on aviation activity, noting that revenue growth can be sustained “if airlines keep flying,” underscoring the sector’s reliance on passenger volumes.

WHSmith Melbourne T3. Image: GS Projects/Facebook.

The company’s shares fell 15% last week and are now down 16% year-to-date, reflecting investor concern about the impact of disrupted travel on earnings.

WH Smith reported a pre-tax loss of A$51.75 million for the six months to February, widening significantly from A$8.28 million a year earlier, and cut its dividend as it moves to protect margins and strengthen its balance sheet.

While the company does not break out detailed earnings for Australia, the market remains a key contributor within its “Rest of World” division. Australian revenue reached £83 million (approximately A$162 million) in the year to 31 August 2024, up marginally from £82 million (A$160 million) the prior year, with management indicating further growth since.

However, the near-term outlook has weakened. Airlines initially grounded flights following the outbreak of conflict in the Middle East and are now contending with concerns over jet fuel availability, creating ongoing volatility in international travel flows that directly affect airport retail performance.

WH Smith now expects full-year profit before tax and underlying items to be between A$186.3 million and A$217.35 million, below last year’s A$223.56 million, reflecting softer trading conditions.

Despite current headwinds, the company continues to position Australia as a strategic growth market alongside Ireland and Spain, with a focus on expanding scale in travel retail. However, that strategy is increasingly contingent on the recovery and stability of global aviation.

The update comes as the group continues to rebuild credibility following an accounting misstatement last year, which resulted in the resignation of former chief executive Carl Cowling after profits were overstated by approximately A$62.1 million.