- Exploring options for High Street division
- Talks ongoing with prospective buyers
- Focus on faster-growing Travel arm
Shares in WH Smith (SMWH) were marked up 5.5% to £12.11 on 27 January after the global travel retailer confirmed it is ‘exploring potential strategic options’ for its storied-yet-struggling High Street business, which opened its first shop in London back in 1792.
These include a possible sale of all 500 High Street stores at a time when the challenges facing the UK high street are legion, ranging from the shift towards online shopping and subdued footfall to an array of rising costs following the recent UK Budget.
A successful sale and repositioning of WH Smith as a pure-play travel retailer would be welcomed by investors, though the company caveated: ‘There can be no certainty that any agreement will be reached, and further updates will be provided as and when appropriate.’
WH SMITH HAS BEEN ON A JOURNEY
WH Smith’s High Street arm remains profitable and cash generative, but it has become a smaller part of the group over a past decade that has seen the FTSE 250 retailer morph into a focused global travel retailer.
Boasting over 1,200 stores across 32 countries, the faster-growing, higher-margin Travel division now generates three-quarters of WH Smith’s group revenue and 85% of its trading profit.
Through what is now the core business, WH Smith sells an array of travel essentials, ranging from food-on-the-go, drinks, health and beauty and tech accessories to books, newspapers & magazines.
Travel is a growing international business with more than 300 stores in North America, the world’s largest travel retail market where chief executive Carl Cowling sees ‘excellent prospects to further grow our airport business’.
Travel, which saw strong momentum over 2024’s peak summer period, is well positioned to benefit from the structural growth in global passenger numbers and what WH Smith sees as the ‘considerable opportunities to win and open additional stores’.
WHO MIGHT BUY HIGH STREET BUSINESS?
Russ Mould, AJ Bell investment director, said: ‘There isn’t an obvious buyer for the high street business, particularly if WH Smith is looking to sell everything together rather than in blocks of stores.
‘There aren’t many retailers who would want to take on an additional 500 stores in the current climate. It’s probably a step too far for Frasers (FRAS), Next (NXT) is making the most of the stores it already has and B&M (BME) seems to have enough on its plate to be so bold as to snap up the WH Smith portfolio.’
Mould continued: ‘CDS Superstores might be a name to watch as The Range owner is one of the few retailers hungry for more, having last year bought the Homebase brand and up to 70 stores. Alternatively, a private equity-backed consortium might want to take control and run the stores on a franchise basis, potentially keeping the WH Smith name if that was an option.
‘Interested buyers may want to repurpose the high street stores for alternative use. Turning shops into gyms has proved to be a successful model for many leisure operators and the fitness industry continues to grow in the UK.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Ian Conway) own shares in AJ Bell.
