WHSmith shares continue to sink ahead of high street chain rebrand
WHSmith’s shares have sunk more than 18 per cent since the company’s board approved the sale of its high street chain at the end of March.
It’s one of the few retail stocks that hasn’t recovered from the tariff-fueled market dip in the first week of April, with investors still concerned about the stationer’s prospects.
“It is simply rather unfortunate that the key growth part of the story is North America, which is, of course, currently a very volatile situation,” Peel Hunt analysts said.
At the end of March, WHSmith announced the sale of its high street arm to private equity firm Modella. The business will be rebranded at TG Jones.
The sale marks a strategic shift for the company as it moves to focus on its expanding travel retail operations.
Despite the share price dip, however, City brokers have by and large remained positive about the prospects for 233-year-old WHSmith once it sheds its high street arm.
“It is very hard to be categorical on US consumer confidence, but we still see growth coming from this source in the years ahead,” Peel Hunt analysts added.
It’s more likely that investors are simply jittery about the prospects for growth in North America given the geopolitical tensions and likelihood of reduced travel to the country.
“The agreed sale of the declining High Street business should streamline the Group’s focus,” Russell Pointon, director of consumer at Edison, said.
“The key areas for investor focus include progress in executing the North American growth strategy, the scalability of the one-stop-shop format across geographies, and the Group’s ability to maintain margins and cash generation against a tricky geopolitical background.”
AJ Bell investment director Russ Mould added: “The travel division benefits from a captive audience which enables it to sell its wares at premium prices in airports and rail stations.”
“An area which the market is likely to watch closely is the performance in North America – the company remains effusive about the opportunities here having expanded significantly across the Atlantic over recent years.
“However, there have been signs of reduced travel to the US under the current administration and if this becomes a trend rather than a blip it could be a significant headwind for the business,” Mould said.