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After 230 years, WH Smith may be taking its first significant step away from the UK high street.
The retailer, which operates nearly 500 high street shops, has confirmed it is exploring a possible sale of this part of its business.
“WH Smith confirms that it is exploring potential strategic options for this profitable and cash-generative part of the group, including a possible sale,” the company said in a statement. But while the phrasing is optimistic, the timing has raised eyebrows, given the economic challenges facing the retail sector.
Why sell now?
WH Smith’s high street stores contribute just 15 per cent of the group’s overall profit, with the far more lucrative travel retail side — its shops in airports, train stations, and hospitals — driving its success.
This travel arm, which boasts over 1,200 stores, is not included in the potential sale. Early reports suggest the WH Smith name would remain on these travel outlets, even if the high street stores are sold.
But what comes next for the high street stores, and indeed will there be a sale? WH Smith said there was “no certainty” of one and market conditions are far from ideal for an easy deal.
“The timing looks odd regarding a potential sale of WH Smith’s UK high street operations. It has hoisted the ‘for sale’ flag precisely as the retail sector is entering a downturn, led by a cautious consumer and a rise in costs thanks to Rachel Reeves’ Budget decisions,” Russ Mould, investment director at AJ Bell explained.
“Negative sentiment towards the sector could encourage potential buyers to seek a bargain price as they would have a good argument as to why the stores and operating business might not be as valuable as WH Smith thinks. They might have been better to wait until the economy is stronger before looking at its options for the business.”
That said, Mould acknowledges a sale would make “strategic sense” for the group and noted the “woeful” under-investment in the physical stores over the years, while also pointing out that “having Post Office concessions inside certain stores has also helped to drive footfall.”
What could happen to WH Smith’s high street stores?
There’s no guarantee any purchase would see the stores remain of the same kind, therefore potentially hosting Post Office services.
“For far too long, certain communities are being turned into postal deserts, and bad economic decisions are eroding high streets up and down the country,” said the Communication Workers Union, per the Guardian.
“Just like the Horizon scandal, Post Office staff are being put at the bottom of the pecking order – these workers and the communities they serve deserve an end to this instability.”
Alongside potential Post Office departures, WH Smith stores closing could put up to 5,000 retail jobs at risk, with the British Independent Retailers Association saying a sale may “create yet another serious gap in essential high street services for local communities”.
Yet the shops – by the same name or another – could yet remain, in their current guise or altered.
A future of evolution or extinction?
Kien Tan, a senior adviser at PwC said: “The same formula that works in travel stores is no longer sufficient on high streets.
“That doesn’t mean that the high street stores don’t have a future, but they probably will look very different – different products, perhaps incorporating hospitality or other services to give people a reason to visit. That doesn’t mean that WH Smith needs to disappear, but it might have a different brand name above the door to reflect the different customer proposition.”
Elsewhere, suggestions have been that local gyms or bargain-basement supermarkets could look to expand their reach by taking on some locations, if a part-sale rather than bulk deal for every shop is a possibility.
WH Smith as we know it on the high street is no longer anything approaching a necessity for many; it, like many brands and shops before it, will merely need to evolve and refocus to continue existing – in this case, seemingly, by focusing exclusively on the busier, more lucrative travel arm of its brand.
