In the headlines for the wrong reasons

I’m talking about WH Smith (LSE:SMWH), and it’s certainly a controversial choice! At its core, the business is split in two. The traditional high street stores sell books and snacks, which many are aware of. The far more important part of the company is the Travel division. It operates in airports, railway stations and hospitals across the UK and internationally where it benefits from captive footfall and high-impulse purchasing.

This is where WH Smith really makes its money, earning revenue through concession agreements with landlords such as airports, selling everything from magazines and sandwiches to electronics and travel essentials at high margins due to premium pricing and high dwell time.

The share price fall

Over the past year, the stock is down 62%. In short, many investors have grown uneasy about a mix of cyclical and structural pressures. The high street business continues to drag on sentiment, with declining footfall and thin margins.

At the same time, trading updates have included profit warnings and gloomy outlooks. Earlier this week, the company cautioned that pre-tax profits for the year would range £75m-£90m, down from previous guidance of £90m-£105m.

It also announced a capital raise of £100m, aimed at strengthening the balance sheet, but sending a clear, worrying signal that it doesn’t have good cash flow right now.

Is the sell-off overdone?

The stock’s at its lowest level since 2012, but the case for it being cheap needs more substance than that. For a start, the company’s still on track to be profitable. It’s not like the business is losing significant money and in threat of going bust immediately. Therefore, if it can remain profitable, there’s a case to be made for the stock having fallen too far relative to the earnings potential.

Further, the Travel division’s still expanding internationally, particularly in North America and Europe, where airport retail spending per passenger remains structurally higher than pre-pandemic levels. The latest update mentioned, “total revenue in North America for the 14 week period increased by 10% compared to the prior year”.

This division’s high-return and increasingly dominates group profits, meaning the business is gradually transforming into a travel-focused operator rather than a traditional retailer. If passenger volumes continue to recover globally, earnings could track higher, as much of the cost base is fixed under long-term concession agreements.

Don’t get me wrong, this is a high-risk stock. Even though I believe it’s cheap, there’s nothing to say it can’t get even cheaper, falling more. For the moment, it’s too risky for me to buy, but investors who see things differently might want to consider it.

Should you invest £5,000 in WH Smith right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if WH Smith made the list?

Jon Smith has no positions in the shares mentioned.

The post My friend says this is the best cheap share in the market. Is he correct? appeared first on The Twelfth Magpie.

At the same time, the company announced a new share issue to raise £100m of fresh capital. The 26m new shares on offer amount to about 20% of its existing share capital. The placing is intended “to strengthen capital position to enable ongoing transformation.” Is it time to run away, or buy shares cheap? Let’s take a look.

Global trading pressure

On first examination, WH Smith’s latest trading update doesn’t look as bad as the fall in the shares might suggest.

In fact, total revenue in the 14 weeks to 6 June rose 5% on a constant currency basis, with like-for-like sales up 2%. In the crucial North American market, like-for-like sales fell 1% — which doesn’t sound like a crisis event. But the 2026 outlook has significantly declined.

Management’s expectations for the full financial year reflect the observed and anticipated decline in passenger numbers and weakening consumer demand … The group assumes no near-term improvement in consumer confidence and that jet fuel supplies can be maintained.

Trading update, 10 June 2026

The company expects pre-tax profit for the full year to come in between £75m and £90m. Previous guidance had suggested £90m to £105m.

New shares shock

The new share issue “is expected to reduce leverage from the current higher than targeted leverage levels to around 2x by the end of the 2026 financial year.” And that strongly suggests balance sheet liquidity has been getting a bit tight.

There’s one key piece of information we don’t yet have — the offer price. The company told us: “Details of the placing price and the number of placing shares will be announced as soon as practicable after the close of the bookbuild.” That essentially means after consultations with investment banks underwriting the issue are complete.

For now, that uncertainty has likely rattled shareholders. They just don’t know how big a discount WH Smith will have to offer to raise the target capital.

What should investors do?

There is no doubt that current economic uncertainty and its effect on consumer appetite for spending has created headwinds … This placing is a prudent and proactive step to accelerate our transformation of what is, at heart, a good business.

Executive Chair Leo Quinn

There’s no way to sugar coat the first part of what Quinn said there. As for the second part, the question of whether WH Smith is indeed a good business is the critical one. I think it probably is. I’d say it has a decent defensive moat in its chosen market segment, for one thing.

My problem is, I have no idea what the company should be worth. On that basis, I’m keeping away. But investors considering buying WH Smith shares for their long-term recovery potential might do well.

Should you invest £5,000 in WH Smith right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if WH Smith made the list?

Alan Oscroft does not hold any positions in the companies mentioned.

The post Here’s why WH Smith shares just crashed 20%! appeared first on The Twelfth Magpie.

It’s a classic example of being greedy when others are fearful. But how has that stock done since Buffett’s statement?

How’s it done?

Bank stocks were cheap in 2009 and Wells Fargo was trading at around $9 per share. It was just after the depths of the banking crisis. 

Importantly, Buffett’s exact statement was:

If I had to put all of my net worth into a stock, that would be the stock.

The Berkshire Hathaway chief didn’t say that he was going to do this. And that’s just as well. 

Since March 2009, the stock has returned around 8.2% a year. But that’s below the S&P 500, which has generated 14.8%.

So was Buffett wrong? Sort of, but the situation is a bit more complicated than a quick look at the returns lets on. 

What went wrong?

In the subsequent five years, the stock did indeed outperform by a significant margin. But it faltered in a big way after that.

In 2016, it transpired that Wells Fargo had been creating fake accounts. As a result, the firm had to operate under an asset cap for almost a decade. That caused a huge drag on returns. And that’s a big reason why the stock underperformed the S&P 500 until 2024. 

Since then, the stock has been roughly in line with the index. So maybe Buffett’s prediction wasn’t such a bad one.

Nobody’s perfect

There’s a crucial lesson here for investors that has nothing to do with Wells Fargo. Not even the best investors can foresee everything.

That’s why it’s so important to not go all-in on any one investment. Things can go wrong that are beyond your control. There’s no way Buffett in 2009 could have been expected to foresee a scandal emerging in 2016. But it had a big effect on the stock.

That means investors need to think carefully about their portfolios. Specifically, they need enough diversification to cope with these risks. 

Having a top stock idea is a great thing. But it’s important to avoid being in a position where things can all go wrong at once.

A UK example

From the UK, WH Smith (LSE:SMWH) is a recent example. Back in 2024, the stock looked pretty attractive with a growing travel business.

Unfortunately, it wasn’t. News of an accounting irregularity transpired and then developed further, which caused the stock to crash.

I owned the stock at the time. And I don’t think there was any way I could realistically have known about that at the time.

I’ve since sold it. But the situation has got even worse for continuing investors, with the conflict in the Middle East causing a profits warning.

I’m not quite sure how – I spent about £17 on not a lot in the Stansted Airport outlet the other week. But that’s the way it is.

Investing lessons

Like Wells Fargo, WH Smith is going through a repair process. And I think there’s a lot to like about the business. 

I continue to watch it and keep an eye on its recovery. But I’m very glad I wasn’t all-in on it when I was buying in 2024.

The post Warren Buffett once said he’d put 100% of his net worth in this stock. How’s that worked out? appeared first on The Twelfth Magpie.

As a result, some are starting to look very cheap. Time to consider buying?

A sector in focus

First up is Pollen Street Group (LSE:POLN). The alternative investment manager has seen the share price fall 18% in the past month alone. But over the past year, it’s still up 5%.

The move lower is partly due to concern about private equity and private credit funds. Given the volatility in the markets right now, people are a bit scared about private markets where liquidity isn’t that high. What I mean is that it’s harder to sell a holding in a private company or recoup a private loan than if it were publicly listed.

However, I don’t see this as being a fundamental problem for the long term. Pollen Street’s continuing to outperform in its investment strategies. The latest company update from November showed total assets under management reached £6.7bn, up 32% from the same time period last year.

With a price-to-earnings ratio of 9.54, the short-term move lower has pushed the stock to cheap levels. It’s well below the FTSE 250 average ratio.

What makes it look seriously undervalued is the fact that the drop over the past month doesn’t match the company’s growth trajectory. As a result, it appears to me this dip’s being driven more by general investor fear than by anything more serious. Of course, the risk is that the fear compounds, which could result in the next earnings report detailing a fall in assets under management and therefore impacting profitability.

Rebuilding brand reputation

Next up is WH Smith (LSE:SMWH). The stock’s down 15% in the past month, bringing the total fall over the last year to 45%.

It’s true that the move lower in the past week has been driven by concerns in the Middle East. A trading update from last week spoke about how they are mindful of “the impact that this is having on passenger numbers across our key markets”. Further, the broader move over the last year speaks to accounting problems that surfaced last August. This remains an ongoing reputational risk.

Yet the drop in the past week has pushed the stock down to the lowest level in well over a decade. When I take a step back, I think this makes the stock look very cheap.

I don’t expect the conflict in the Middle East to last long. This should act to minimise the revenue hit for the company. Is profitability going to fall by 15% because of a conflict that has existed for a couple of weeks? I don’t think so, which makes the share price move of 15% seem a little overdone.

Further, the bulk of the crash from last summer wasn’t due to business deterioration but a financial reporting issue. If the company can move on from this and show more controls are in place, the stock should be able to recover. As a result, I think both Pollen Street and WH Smith are worth considering as potentially cheap purchases right now.

The post These 2 UK stocks just got insanely cheap appeared first on The Twelfth Magpie.

A new leader might be about to set the company on a more promising path. But my investment thesis has fundamentally changed and I now think there are better opportunities elsewhere at the moment.

What went wrong?

I bought WH Smith shares because I thought they were cheaper than they looked. Specifically, I had the view that the stock market was underestimating the value of its travel business.

With £189m in annual trading profits and sales growing at 10%, I thought a market value of £1.4bn was a bargain. But not everything was quite what it seemed.

Unfortunately, the company wasn’t as profitable as it looked. An accounting irregularity meant it had significantly overstated the profits in its North American business at £54m, rather than £34m.

By the time the investigation concluded, the trading profits in this part of the firm for 2025 came in at just £15m. And that fundamentally changed the investment equation from my perspective.

The stock crashed when news of the accounting issue emerged and fell further as the investigation revealed further details. That’s given me a major problem in trying to figure out what to do.

Fortunately though, I didn’t panic and sell when the price was even lower. But with the stock pushing higher at the start of the week, I decided this was my chance to sell and cut my losses.

A new hope?

The reason the stock jumped suddenly is the company’s made an announcement about its new leadership. Leo Quinn’s going to take over the role of Executive Chairman in April.

Investors clearly think the appointment’s a good one and it’s easy to see why. Quinn has a strong record of turning around struggling businesses, including Balfour Beatty and QinetiQ.

The appointment’s set up in a way that means there’s a lot at stake for the new chief personally. A significant amount of Quinn’s compensation is based on doubling the share price within five years.

The plan involves shifting the firm to focus on travel retail and getting the North American division back on track. Strengthening internal controls is also a priority after the recent issues.

In addition to a 1,887,519 share award, Quinn has announced his intention to buy £2m in WH Smith stock using his own cash. That’s a big commitment and a strong statement of intent.

The share price pushed higher on Monday as investors got a new reason to be optimistic. But the value equation doesn’t quite stack up in the way I thought it did when I first bought the stock.

Lessons learned

So what am I learning from this? Sometimes you win and sometimes you lose as an investor and it isn’t always possible to foresee everything that might go wrong.

Building a diversified portfolio’s a good way of trying to limit the impact of this risk. But when unexpected things do happen, the right thing to do is to stay calm and reassess.

The post Why I sold — not panicked — out of this FTSE 250 stock appeared first on The Twelfth Magpie.

Few things can shred investor confidence like irregularities in a company’s books. Unfortunately, a pre-Christmas update from the battered retailer suggested the intrigue will run into the New Year.

But let’s pull back for a second. Having fallen 45% since 1 January, WH Smith shares now trade on a forward price-to-earnings (P/E) ratio of 9.6 times.

That’s below the bargain watermark of 10, and is so low I’m wondering whether it could provide the bedrock for a miraculous recovery in 2026 if value investors step in. Could Smiths really pull off a stunning recovery in the New Year?

Great moves

2025 has proved a transformative year for WH Smith, the company finally hiving off its stricken high street operation to Modella Capital in March. It also sold its funkypigeon.com unit to Card Factory a few months later.

Shareholders cheered the moves, which leave the company with just its high-flying travel business. As analyst Mark Crouch of eToro notes, “airports and railway stations offer reliable customer footfall, regardless of the economic landscape, as well as strong pricing power“.

This narrowed focus has helped Smiths navigate the worst of the retail sector’s recent downturn. Like-for-like sales were up 5% in the last financial year (to August 2025), and the company expects headline revenue growth of 4% to 6% this year.

Chaos drags on

Yet the accounting scandal continues to overshadow the company’s good work elsewhere. And it threatens to drag well into the New Year.

Smiths’ share price slumped in August after it announced some income had been booked prematurely, causing it to overstate profits by roughly £30m. It led to the delay of full-year results being published — not once, but twice — and the departure of chief executive Chris Cowling last month.

The scale of the chaos means even the most enthusiastic dip buyers have steered clear of the company. News last week (19 December) that the Financial Conduct Authority (FCA) is investigating the accounting faux pas hasn’t helped matters, pushing the retailer’s shares lower again.

Can WH Smith rebound?

I’ve long been a fan of WH Smith, but events in 2025 have (perhaps unsurprisingly) knocked my confidence in the company for six.

It’s not just the accounting problems themselves that I’m concerned about. The company is now reviewing its US operations in the wake of the scandal, adding another layer of uncertainty.

Given that the US is a key plank of Smiths’ growth strategy — and the business is facing these problems still without a permanent CEO in place — the company’s investment case now looks incredibly shaky to me.

It’s quite possible the business will bounce back strongly from its current woes. It’s certainly well placed to exploit a predicted sharp rise in global passenger numbers — Airports Council International (ACI) thinks total passenger traffic will rise by at least 2.5bn between now and 2030.

I won’t be adding WH Smith shares to my own portfolio. However, for more adventurous investors seeking a potential recovery hero at rock-bottom prices, the FTSE 250 company’s may be worth serious consideration.

The post Down 45%, is this the FTSE 250’s greatest recovery share for 2026? appeared first on The Twelfth Magpie.

The company has spent the last four months doing a thorough job of tackling its issues and there’s still more to be done. But investors do have reason to be positive in the year ahead.

A turnaround story

Despite an accounting scandal that sent the stock down 34% in a day, WH Smith has had some genuine highlights in 2025. It’s done a good job of focusing its business on travel retail.

To this end, the company has divested its high street stores and online greeting card operation. Both of these look like good moves to me and I think the travel business looks promising.

In the year that ended in August, the company registered overall sales growth of 7% with the majority of this coming from higher like-for-like sales. That’s a decent result.

The accounting irregularity in the US business however, meant profits fell during the year. But investors do at least have clarity about where the company is. 

Where are we now?

In terms of where it’s heading, WH Smith’s guidance is for similar revenue growth and profit margins from the US division are expected to double. Those are encouraging signs. 

It’s worth noting though, that the business has made a slow start to the year. Like-for-like sales growth’s fallen to 3%, led by a weaker performance in UK train stations.

There’s also still some ongoing uncertainty. The company doesn’t have a permanent CEO and it’s a pity Sir Dave Lewis isn’t available – this might have been right up his street.

Investors though, can have confidence in the accuracy of the firm’s numbers and this hasn’t been guaranteed of late. And it’s extremely important from an investment perspective.

Investment analysis?

The latest decline implies a price-to-earnings (P/E) ratio of around 15. There are definitely cheaper retail stocks available, but they generally face higher competitive pressures.

Travel retail’s shielded from a lot of competition from other retailers and – more importantly – e-commerce. That’s why WH Smith has been shifting its focus to this part of the business.

One thing investors can ignore, at least for the time being, is the 5% dividend yield. In its latest update, the company’s cut its final payment by 73%.

This is in line with the firm’s general policy for shareholder returns. But a consequence of restating its earnings over the last couple of years is the dividend is set to fall. 

2026 and beyond

I think 2026 is likely to be a year of consolidation for WH Smith. The issues it’s been dealing with are real and serious and I expect the share price to reflect this.

As a result, I don’t think it’s a top opportunity for investors right now. I own the stock in my portfolio and I’ll be monitoring the situation, but I’m looking at other opportunities right now.

The post Is this FTSE 250 retailer set for a dramatic recovery in 2026? appeared first on The Twelfth Magpie.

So what’s gone wrong? Let’s take a closer look.

The problems start with headline profit before tax and exceptionals of £108m, down 5.3% from the previous year.

Interim CEO Andrew Harrison said: “It has been a difficult end to the year for the group,” which has shifted focus to being a pureplay travel retailer now after selling its UK High Street and Funky Pigeon businesses. He added: “The board and I are acutely aware that we have much to do to rebuild confidence in WH Smith and deliver stronger returns as we move forward.”

A full-year dividend of 17.3p per share — rebased from the 33.6p paid a year ago — gives shareholders a 2.5% yield. And that’s not much to shout about. But at least it was covered 2.5 times by earnings per share (EPS) of 43.4p.

2026 guidance update

With UK sales growth softening in the first few months of the new financial year, the company offered 2026 guidance for a 4% to 6% rise in revenue. So, pretty much in line with the year just ended, though how that might translate into profit remains to be seen.

These results shouldn’t really come as a surprise after the profit warning in August, when news of “an overstatement of around £30m” in North America profits broke, said to be “largely due to the accelerated recognition of supplier income.”

That news gave the WH Smith share price a kicking, crashing 42% in a single day. After the latest decline, we’re looking at a year-to-date fall of 45% by the time of writing.

CEO departure

Deloitte has since conducted an independent investigation which confirmed accounting inconsistencies in supplier income recognition within the company’s North America division. That led to CEO Carl Cowling stepping down in November. And the company downgraded headline profit expectations to between £100m and £110m.

I’m sure some who still see a strong underlying business will be lining up WH Smith as a potential recovery play for 2026. And I can see some attraction here.

The North America accounting problem was far from the most nefarious I’ve ever seen. It wasn’t good, but it really just affected the timing of profits — and those profits are still actually there.

Travel outlook

The recovery in the travel sector can’t do any harm. International airline passenger numbers are expected to more than double by 2050. Want a solid long-term outlook? We won’t see many investment analysts looking that far ahead.

The latest 43.4p EPS figure puts WH Smith shares on a trailing price-to-earnings (P/E) ratio of 15 though, so the stock doesn’t look like a must-buy right now to me.

But I’m keeping my eye open for updated forecasts. Renewed profit growth potential for the reshaped business could make it one to consider.

The post Why did the WH Smith share price just slump another 5%? appeared first on The Twelfth Magpie.

Here are two of them.

Down 43%

Let’s start with WH Smith (LSE:SMWH), which has plummeted 43% year to date.

The damage came back in August when the company announced its North American division had been overstating profits. It led to the departure of the chief executive and annual results being delayed (twice) while an independent reviewer gets to the bottom of things.

The results covering the year to 31 August (FY25) are finally due tomorrow (19 December). But given the obvious risks here, why bother with WH Smith?

Well, firstly, this wasn’t fabricated income. The retailer recorded it too early from suppliers. It now expects to book an annual headline trading profit of £5m-£15m in its North American division, instead of £55m as originally guided.

So, this appears to be a timing issue (though obviously a serious one, with prior year adjustments also expected). Supplier income in its UK and Rest of World divisions has been “appropriately recognised“.

Therefore, the problem is confined to North America, not group-wide. And the company still expects group pre-tax profit to be in the range of £100m-£110m for FY25.

Meanwhile, the long-term opportunity still appears intact, in my opinion. WH Smith is now a pureplay travel retailer, with over 1,200 outlets worldwide, including in leading international airports where competition is structurally limited.

Between 2024 and 2050, passenger numbers are forecast to increase 2.5 times as international markets develop and travel booms. WH Smith intends to grow its share of the massive North American travel retail market to around 20% by 2028, up from 14% today.

Of course, it will take time to fully restore investors’ trust. But patient investors might want to consider the stock while it’s at a 12-year low.

The forward price-to-earnings (P/E) ratio is now less than 10.

Down 38%

The second FTSE 250 stock I think could bounce back in 2026 is Greggs (LSE:GRG). It has plunged 38% this year after weaker-than-expected sales growth and wider macroeconomic pressures, which are admittedly still risks in the background.

Yet with November’s inflation rate falling to the lowest level in eight months, and further interest rate cuts likely in 2026, consumer confidence might start creeping back.

2025 will also be Greggs’ peak year for capital expenditures, as it invests in new Kettering and Derby facilities. The latter, set to open in early 2026, will be a state-of-the-art frozen production and logistics site. It will feature fully automated robotic order picking and distribution, which should boost long-term operating margins.

These locations will add the manufacturing and logistics capacity to support up to 3,500 shops (up from 2,675 in September).

In the meantime, the firm is also trailing ‘Bitesize Greggs’, which are smaller store formats for high-footfall locations (like busy train stations and airport terminals) that don’t have enough room for a standard shop.

After the share price collapse, Greggs trades on a forward-looking P/E ratio of roughly 13. Add in a 4% dividend yield, and this FTSE 250 stock looks like a solid value proposition worth taking seriously.

The post 2 out-of-favour FTSE 250 stocks set for a potential turnaround in 2026 appeared first on The Twelfth Magpie.

An accounting irregularity caused the stock to crash this year, but the firm’s position is now a lot clearer. And with the stock still near its lows, I think it’s worth a look.

Travel retail

In the last year, WH Smith has sold off its UK high street stores to focus on its more profitable travel operations. At least they looked like they were more profitable. 

Unfortunately, the firm’s US division was incorrectly accounting for income from suppliers. When this emerged, the stock fell 42% in a day and an investigation immediately followed.

The results of the audit were released on Wednesday (19 November). And the news is that trading profits in WH Smith’s US division are expected to be between £5m and £15m this year.

That’s way off the firm’s initial £55m forecast and even below the revised guidance of £25m. But the share price climbed 7% in response as a result for two main reasons. 

The current situation

One reason for the positive response is that the market’s finally in a position to start thinking seriously about the stock again. That’s just not possible if the reported numbers aren’t right.

Intelligent investors can disagree about whether a result is good or bad or which metrics are the most important. But if the numbers aren’t accurate, none of this matters. 

The auditor also confirmed that the problem is “substantially a timing rather than an existence issue”. In other words, some of the profits are delayed – not lost – and this is a good thing.

In its update, WH Smith said that around £20m of the income is expected to be recognised in future years. And further guidance is coming when the firm reports next month.

Where are we now?

With the issues now in hand, investors are in a position to take a proper look at WH Smith again. And I think there’s quite a bit to like about the business at this point. 

Focusing on its travel outlets looks like a very good move to me. Its venues now face limited competition from other retailers and almost none from the threat of e-commerce. 

Profits for the fiscal year ended in August are now expected to be between £100m and £110m. With the firm’s market value and net debt, that implies a valuation multiple of around 11. 

That’s not particularly high. And with the uncertainty around the company’s accounting irregularities now largely out of the way, I think the stock is worth considering.

New beginnings

As part of the investigation, CEO Carl Cowling announced his resignation. That means WH Smith is – for the time being, at least – without a permanent leader. 

This is the kind of uncertainty that inevitably brings risk. Getting the right person in to restore trust in the company will be important.

Overall though, a clear reset is probably what’s needed. But I think whoever comes in to take charge of the restructured organisation will have an interesting business to work with.

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