Berenberg lowers target price on WH Smith following second guidance downgrade

(Sharecast News) - Analysts at Berenberg cut their price target for retailer WH Smith from 574p to 420p on Monday after the group's thirdquarter update triggered a second guidance downgrade and an equity raise to shore up the balance sheet.

Berenberg said the bulk of its downgrade stemmed from a sharperthanexpected slowdown in the WH Smith's North America division, where its InMotion and Resorts units continued to underperform. Likeforlike sales at InMotion swung from 3% growth to a 5% decline, while Resorts weakened from 8% to 11%, despite passenger numbers and Las Vegas visitor data showing marginal growth. Rival SSP reported 3% likeforlike growth in North America over a similar period, suggesting the weakness was specific to WH Smith.

The German bank, which reiterated its 'hold' rating on the group, said softer demand had forced heavier promotional activity, pressuring margins and prompting a �12m cut to its North America underlying earnings forecast - which drove a 15% reduction to group pre-tax profit guidance, now expected at �75m to �90m.

To prevent leverage rising above 2.5x, WH Smith raised �106m through a placing of around 26m shares at a 17% discount - the proceeds of which will reduce borrowings and help accelerate its North American restructuring programme.

Berenberg also noted that WH Smith's shares trade on roughly 11x blended FY26-27 earnings - broadly in line with peer SSP, which has maintained guidance and has been returning cash to shareholders - leaving the riskreward "fairly balanced".

Reporting by Iain Gilbert at Sharecast.com