WH Smith warns on hit to American concessions

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The Independent Online

WH Smith, the country's biggest newspaper and book retailer, yesterday warned that the terrorist attacks in America last month have had a "material adverse impact" on its business in the country.

WH Smith said its sales have fallen due to the "significant reductions" in individuals flying and staying in hotels since 11 September in the US.

Shares in the group fell 7.25p to 429p, reflecting the fact the City had already taken in its exposure to the US in the days after the attacks.

Nathan Cockrell, an analyst at Credit Suisse First Boston, said the impact could be more extensive than just a decline in WH Smith's own sales. "The company also rents out space to retailers. If they become bankrupt, WH Smith would be liable. In a worst case scenario, we would expect the hit to be £24m."

But Mr Cockrell said he actually predicted the impact to be less than that, coming in at no more than 10 per cent of pre-tax profit, which CSFB estimates for 2002 at £160m.

It is also expected that WH Smith's UK business will be affected, but to a much smaller degree as most of its outlets are situated in rail stations rather than airports.

WH Smith views the US as its second most important market after the UK, with 180 airport stores and 393 outlets inside hotels in America, which accounted for 9 per cent of group operating profit last year.

The group, which is in a closed period ahead of annual results to 31 August due on 18 October, said it did not yet know "what the full effect on sales and profits in the current financial year will be."

WH Smith issued the warning after the Financial Services Authority urged companies on Friday to give guidance as early as possible about the impact on their US business of current market conditions.

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