WH Smith (LSE: SMWH) shares fell as much as 20% in morning trading Wednesday (10 June), before edging back up a few percent. It was kicked off by a profit warning, as the Middle East conflict has hit customer numbers at the company’s airport stores, primarily in the US. And we’re going to see a £150m non-cash impairment charge on the books this year.

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?

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