Donald Trump’s tariff war is more likely to lead to price cuts than inflation for many retailers in the UK, according to the boss of WH Smith, as east Asian suppliers seek alternatives to the US.
Many economists including those at the Organisation for Economic Co-operation and Development (OECD) have suggested that increased barriers to trade could fuel inflationary pressures across the globe.
But Carl Cowling, the chief executive of the retailer, said: “I don’t think there is any logic in why there would be inflation. You could argue it would be the other way around and stock will free up, and it is more likely to be that than inflationary for the UK.”
He said the company had not seen any disruption to deliveries from overseas suppliers owing to the rapidly changing news on tariffs. Any changes in sourcing or prices were unlikely to be swift for WH Smith as the group’s stock orders were “locked and loaded” until after Christmas.
“We know exactly what product and packaging we are getting, what we are paying and have got orders committed,” he said.
He added that trading in the UK was “pretty robust” with airline passenger bookings up slightly year-on-year for this summer and “no softening in numbers at all” in recent weeks despite fears about lagging consumer confidence.
But he said retailers “have got to be a bit mobile” to deal with volatile changes in the trading landscape as the US changes the rules on tariffs from China and elsewhere.
He said WH Smith’s US business – which operates 258 stores in airports, most of which handle domestic flights – bought the majority of its food and snacks locally.
But its suppliers of other products, such as headphones and charging cables, were likely to come from countries in Asia, including China, which are now subject to high import tariffs. Cowling said it was likely that suppliers of these small electronics and other goods could shift production from China to Vietnam, the Philippines or other countries with lower tariffs if necessary.
“While we are on top of the detail and mindful of it, I don’t thing we are going to be impacted in the way other retailers [selling, for example] fashion might be,” he said.
Cowling’s comments came as WH Smith revealed that profits at its high street business had dived by almost a third, as sales slid 7% in the run-up to its sale to the Hobbycraft owner Modella.
The group agreed to sell its 480 high street stores last month to focus on its travel business at railway stations, airports and hospitals amid rising costs and falling visitor numbers in traditional retail destinations. The deal is due to be completed this summer.
WH Smith’s high street profits dived by £7m to £15m as sales fell to £239m in the six months to the end of February. However, it said the wider group was on track to produce full-year profits in line with expectations as its travel business, which operates stores in 32 countries, increased sales by a better-than-expected 6% to £712m and profits rose 12% to £56m.
Total group sales edged up by 3% to £951m in the half but it made a pre-tax loss of £25m after exceptional items of £70m, including impairment charges.
WH Smith said it had agreements in place to open more than 90 new stores, including more than 70 in North America. It expects to open more than 60 travel stores worldwide this financial year.
Cowling said its North American business was seeing the benefit of improvements in its stores and product range: “We continue to win new space, and I am delighted to announce that we have recently secured a significant contract at a major east coast airport.
“The second half of the financial year has started well, and we remain on track to deliver full-year results in line with market expectations. We are mindful of the increased level of geopolitical and economic uncertainty; however, given the resilient nature of our business, we are well-positioned to benefit from the growth opportunities in global travel retail.”
