WH Smith to restructure its high street business as travel takes off

WH Smith intends to restructure its high street business after conducting a thorough review of the challenging environment faced by UK stores, as its total revenue edged upwards off the back of growth in its travel locations.

While its high street profit was its third highest in 15 years, the retailer said it will wind down non-core trial initiatives including Cardmarket and WH Smith Local, restructure some operational activities and close around six high street stores. 

The figures

In the financial year ending August 2018, WH Smith's group revenue rose two per cent overall to £1.26bn, up from £1.23bn in 2017. This was largely powered by an eight per cent growth in travel revenue, while high street losses led to a three per cent decrease year-on-year.

Group profit before tax reached £134m, four per cent down from £140m in 2017. Trading profit across its 607 high street stores fell three per cent to £60m, compared to £62m in 2017, while its 867 travel locations jumped seven per cent from £96m to £103m.

Travel now represents 63 per cent of the group's trading profit, which WH Smith said was boosted by growing passenger numbers. It opened 20 new travel units in the UK this year, plus a further 58 internationally.

The cost of its restructuring plans for its high street were £9m across the year, with the move expected to run on into 2018/19 at an additional £5m.

The retailer achieved cost savings of £12m over the year, largely through rent negotiations during lease renewals. A further £10m in savings has been identified over the next three years, as 240 leases expire.

The group also announced today a further share buyback of £50m as it builds confidence in the group's future, following the new direction of the business.

Why it's interesting

"Among struggling traditional retail names, WH Smith has stood apart," said Fidelity Personal Investment associate director Ed Monk. "Preliminary numbers today confirm again its change of direction from a business driven by large High Street stores to one driven by small outlets in airports and train stations."

"Improving trading hasn't been reflected in the shares in the past year, which have trended lower since a peak at the turn of the year. Whether shares look cheap or expensive – trading at 19 times earnings ahead of the results – depends on how you view the company. It's expensive versus the High Street retail sector but is cheaper than other pure travel retailers, which it increasingly sees itself as."

WH Smith's share price fell over 7.6 per cent as markets opened this morning, at a low of £18.73 per share.

What WH Smith said

Group chief executive Stephen Clarke said:

"We had a good year in High Street despite the well documented challenges of the UK high street. During an encouraging second half, the business traded well and we quickly identified the latest trend in the market, becoming a one-stop-shop for all slime related products."

"Despite this good performance, we are not ignoring the broader challenges on the UK high street and, during the second half, we conducted a business review to ensure our High Street business is fit for purpose now and for the future."

"While there is some uncertainty in the economic environment, we are pleased with the start to the new year in both businesses, and will continue to focus on profitable growth, cash generation and new opportunities to profitably invest for the future. We are well positioned for the current year and beyond."