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WH Smith to focus on travel retail as key to future growth


WH Smith LON:SMWH the FTSE-250 listed high street retailer is coming up to its crunch Christmas season. To be fair retailers haven’t had a great time over the past three years with Covid forcing them to shut their outlets – something that was especially harsh for WH Smith as it manages a significant number of embedded outlets in airports and railway stations, which took longer to come back online than the high street – and then followed swiftly by a cost-of-living crisis.

WH Smith, however, published pretty strong results at the start of last month with group revenue up 28% to GBP1.8bn and headline profit before tax up a barnstorming 96% to GBP143m.

Over the past few years, WH Smith has reinvented itself as an airport and travel outlet, selling [highly-priced] pre-travel essentials and is slowly withdrawing from the high street, shutting around 15 high street outlets this year with plans to continue the closures next year and has no plans to open any new high street outlets. The company still has around 1,000 outlets nationally. At the same time the stationery and book seller said it was planning to open up another 110 new travel outlets, with the majority of those [60] in North America, which WH Smith sees as a key growth market.

Decline of the high street

The strategy being followed by the retailer follows a long-term decline in its high street store revenues, which at last count was about half of what it was collecting in 2010. The retreat from high street retail has been a trend across the consumer sector, which has accelerated since the lockdowns imposed in 2020/21 as a result of the Coronavirus pandemic. Many retailers have closed their brick-and-mortar premises and taken their business online, or into multi-sellers.

WH Smith has carved itself a niche in the travel sector and it is in this segment that it has decided to concentrate its investment. If you’ve recently been into a high street WH Smith, you might conclude that its premises need something of a refurbishment. However, the travel outlets are by contrast quite sparkly, and it seems that as it runs down its high street estate at the same time it is building up its travel portfolio.

The stationer seems to be well down the road of reinvention, and in the year to end-August, WH Smith said that its Travel division accounted for about 75% of group revenue, and 85% of headline group profit. The company now describes itself as a “global travel retailer,” with plans to invest GBP140m in capex across the financial year, the bulk of which will be in new travel outlets, given it is not opening up any more high street stores.

WH Smith focus on US travel retail market

As its results suggests the strategy is paying off. Whereas high street profit for the year fell by GBP1m to GBP32m year-on-year, profit from travel retail was up 84% to GBP164m, with UK travel revenues up 36% closely followed by North America at 32% and the latter market is where WH Smith is focussing its development wanting to move from 12% of the US travel retail market to 20% according to analysts.

The retailer has been around for some time, originally founded in 1792 as a news vendor, and has a history of innovation including the creation of the ISBN identifier for books, founding one of the world’s first cable television stations and is behind the FunkyPigeon brand. It is now eyeing – once-again – international expansion. The company declared a final dividend of 20.8p/share making the full year dividend of 28.9p/share

WH Smith opened the week (4th December) at 1,294.2p. Over one year the company has returned -10.9%, with shares ranging between 1,134p and 1,728p. The company has a market capitalization of GBP1.7bn

Analyst consensus on the stock sees an average target of 1,824p, with the most optimistic target being 2,300p. For the year, analysts on average expect profit before tax to be at GBP143m, according to a company compiled analyst consensus. It will be interesting to see if WH Smith has any early Christmas surprises to pull out of its stocking.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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