Focus on international travel market is the ticket for future growth, says WHSmith CEO

The chief executive of retail group WHSmith today said the business’s “resilient nature” would help it continue to grow despite turmoil on global markets

In a statement accompanying its half-year financial results – the first since the Swindon-headquartered group announced the sale of all its 480 UK high street stores – Carl Cowling said WHSmith was well-positioned to benefit from the growth opportunities in global travel retail.

This was despite what he described as the increased level of geopolitical and economic uncertainty.

Total group revenue was up by 3% to £951m in the six months to 28 February, while total revenue in travel – which will become its core business following the UK high street store sale – was up 6%.

Headline group profit before tax and non-underlying items edged down by £1m to £45m.

WHSmith’s strategy has for a number of years been to become a global travel retailer. Ahead of the UK store disposal programme it was already generating three-quarters of its £1.5bn revenue, and a greater proportion of its trading profits, from 1,200 sites in locations including airports, railway stations and hospitals in 32 countries.

The Travel business currently accounts for around 75% of group revenue and 85% of its trading profit.

WHSmith, which has been trading since 1792, today said it had a new travel store pipeline of more than 90 outlets, including 70-plus in North America.

During the period it won a major contract at an unnamed US East Coast airport, cementing its presence as a leading operator in travel essentials in the region.

As a result, the group said it was “well-positioned for future growth as a pure play travel retailer”.

The sale of its UK high street business, signed last month, will result in all 480 stores, its Swindon-based support centre and 5,000 employees moving over to new owner Modella Capital, which already runs the Hobbycraft retail chain.

Carl Cowling said: “The group has had a good first half with consistent like-for-like growth across all our travel businesses, and we are well-positioned for the peak summer trading period.

“Travel trading profit was up 12% at £56m, and the board is today announcing an interim dividend of 11.3p, reflecting their confidence in the future growth prospects of the group.

“Our UK travel business has had a strong half with trading profit 8% ahead of last year. In North America we are beginning to see the benefits of our work to re-engineer our space and improve our retail offer, with like-for-like revenue growth of 3% in the period.

“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.”

He said the second half of the financial year had started well and the group remained on track to deliver full-year results in line with market expectations, with the focus continuing on increasing spend per passenger across each of its divisions.

“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,” he added.

North America, the world’s largest travel market, offered WHSmith “significant market share opportunities”, he said, adding that it was the group’s most exciting growth market where it saw excellent prospects to further expand its airport business.

This division would become an increasingly significant part of the group and was now its second largest division in profit terms, after its UK travel business, he said.

Cowling said the transformation of its UK travel business from a news, books and convenience retailer to a one-stop shop for travel essentials was progressing well and delivering strong results, driving profitability and highlighting significant opportunities for the future.

Existing categories had been consolidated and new ones introduced such as food-to-go, tech accessories and health and beauty.

This transformation was most evident in its largest outlets at London Heathrow, London Gatwick and Birmingham airports. More recently, stores under this one-stop shop format had opened at Edinburgh and Newcastle airports.

It was a highly scalable format and applicable across all of its airport stores, he said, adding that there were “plenty of good opportunities for the future”.

While the rollout had started in the UK, there was great potential for this retail format in its North America and rest of the world divisions.

WHSmith’s UK high street stores will be rebranded as TGJones following Modella’s £76m acquisition.

Cowling also said the group’s previously announced £50m share buy back was progressing with £27m bought as of yesterday.