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WH Smith Shifts Focus to Travel Sector Following Retail Division Sale
Profits at WH Smith have declined ahead of the anticipated sale of its retail arm to private equity. However, the company has reported a surge in its travel division, expressing confidence in its expansion plans within airports and railway stations. This strategic shift comes as WH Smith prepares to rebrand its 480 high street locations under the name TG Jones, following a £76 million acquisition by Modella Capital, the owner of Hobbycraft.
End of an Era for WH Smith on the High Street
The familiar WH Smith brand will, going forward, be exclusively associated with stores located in travel hubs such as airports, train stations, and hospitals. This transition marks the conclusion of a 233-year heritage that began in 1792 with the establishment of a newsagent in central London by Henry Walton Smith and his wife Anna.
Retail Division Performance
WH Smith disclosed that sales in its high street division experienced a 7 percent decrease, amounting to £239 million for the six months leading up to February 28th. This downturn contributed to a 32 percent reduction in profits for this segment, which fell to £15 million. The company attributed this decline to reduced foot traffic in town centers.
End of an era: WH Smith’s High St stores will be rebranded as TG Jones after being sold to Hobbycraft owner Modella Capital for £76m
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This announcement mirrors widespread apprehensions among retailers regarding their capacity to withstand escalating expenses in the coming years.
Russ Mould, investment director at AJ Bell, commented: ‘Any remaining doubts regarding WH Smith’s readiness to part with its high street operations at a modest price are dispelled by its latest interim financial results.’
Travel Division Growth
Conversely, the travel division demonstrated robust growth, with sales increasing by 6 percent to £712 million during the same period. This growth propelled profits upwards by 12 percent. WH Smith’s Chief Executive, Carl Cowling, conveyed a positive outlook for the company’s prospects, even amidst global economic uncertainties.
Expansion in North America
The group, which already has a presence in the US and Canada, including within Las Vegas casinos, intends to inaugurate 70 new stores in North America in the near future.
Cowling emphasized that North America represents its ‘most promising growth market’.
He further stated: ‘While acknowledging the heightened level of geopolitical and economic unpredictability, the inherent resilience of our business positions us favorably to capitalize on the expansion prospects within the global travel retail sector.’
Resilience to Global Economic Factors
According to Cowling, the business is ‘considerably insulated’ compared to its counterparts, as it sources less than 1 percent of its merchandise from China, which has been subject to substantial tariffs imposed by the US.
Cowling also suggested that the company could potentially benefit from a decrease in consumer confidence. He posited that more families might opt for purchasing sandwiches and snacks for onboard consumption rather than dining at airport restaurants before their flights.
Stock Market Reaction
Despite WH Smith’s declaration of a ‘strong start’ to the second half of the year, company shares experienced a 1 percent decrease, or 9 pence, falling to 941.5 pence.
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