WH Smith looking for a buyer for its UK high street business

WH Smith has confirmed that it is looking to sell its High Street stores to complete its strategic shift to being a global travel retailer.

The group generates £452m sales from its UK high street stores, around one-quarter of its £1.9bn annual revenue.

It has 500 stores as well as online businesses under the company brand, funkypigeon.com and cultpens.com.

However its North American travel business on its own is a comparable size to its UK high street operations, with £400m sales and has previously been described by the group as having “significant potential for growth”.

In a statement to the stock market this morning, the company said: “WH Smith confirms that it is exploring potential strategic options for this profitable and cash generative part of the group, including a possible sale.

“Over the past decade, WH Smith has become a focused global travel retailer. The group’s Travel business has over 1,200 stores across 32 countries, and three-quarters of the group’s revenue and 85% of its trading profit comes from the Travel business.”

It acknowledged “there can be no certainty that any agreement will be reached”.

Investment bank Greenhill is leading on the sale.

Swindon-headquartered WH Smith opened its store in London in 1792 and its first travel store at Euston station around 50 years later. The group now employs 14,000 people in 32 countries.

Russ Mould, investment director at Manchester investment platform, AJ Bell, said: “The timing looks odd regarding a potential sale of WH Smith’s UK high street operations. It has hoisted the ‘for sale’ flag precisely as the retail sector is entering a downturn, led by a cautious consumer and a rise in costs thanks to Rachel Reeves’ Budget decisions.

“Negative sentiment towards the sector could encourage potential buyers to seek a bargain price as they would have a good argument as to why the stores and operating business might not be as valuable as WH Smith thinks.

“The valuation paid will be a barometer for how high street real estate is perceived and valued either as an ongoing retail property or a repurposed facility, if indeed a site can be effectively repurposed. Interestingly, the sale could also be a classic test of the Government’s implied loosening of planning laws.

“WH Smith might have been better to wait until the economy is stronger before looking at its options for the business.”

He added: “Timing aside, exiting makes strategic sense and there have been plenty of clues it would happen one day soon. The travel arm is where most of the profits are made. It makes sense to sharpen the focus on what a company does best by offloading less important interests such as the high street operations.

“WH Smith’s high street stores have been woefully under-invested, with the business doing as little as possible to bring them into the modern age. The fact there is an X (formerly Twitter) account dedicated to documenting the chain’s shabby carpets and messy stores says it all.”

He said: “While they aren’t the greatest experience for the customer, the stores have still generated a steady stream of cash. Having Post Office concessions inside certain stores has also helped to drive footfall.

“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, Next is making the most of the stores it already has, and B&M seems to have enough on its plate to be so bold as to snap up the WH Smith portfolio.

“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.”