WH Smith reveals high street overhaul amid ‘tough’ conditions
The boss of WH Smith has insisted the retailer remains committed to Britain’s high street despite launching a restructure to shut stores and call time on new initiatives.
Shares in the group tumbled as much as 12% after it announced a “detailed” review of the high street business which will see it close six stores and wind down its 22-strong budget greetings card chain Cardmarket and franchised convenience store arm WH Smith Local.
The group is instead focusing on growth opportunities for its burgeoning chain of 839 stores based at airports and train stations.
But chief executive Stephen Clarke told the Press Association the overhaul does not signal a retrenchment from the high street.
He said the move is designed to make the high street stores “fit for purpose now and for the future”.
“We are not having a rethink, nor are we changing our strategy and nor are we drawing back from the high street,” he said.
He added that high street store numbers would remain “very stable” after the latest cull.
But he cautioned conditions would remain bleak for UK retailers.
“It will remain tough for some time,” he said. “There is nothing to indicate that high street footfall will improve any time soon.”
One-off costs of the review sent group pre-tax profits down 4% to £134 million for the year to August 31.
But with these costs stripped out, underlying pre-tax profits rose 4% to £145 million.
The figures confirmed a tough year for the high street business, which saw trading profits fall 3% to £60 million, while like-for-like sales dropped 3%.
This was offset by a 7% rise in profits to £103 million at its travel arm, which now makes up around half of its sales and two-thirds of group profit.
Sales rose 3% across its travel outlets.
The revival plans will see WH Smith shrink its store base from 607 to just under 580, including the Cardmarket closures.
It aims to close the Cardmarket stores as their leases come to an end, with affected staff transferring to nearby WH Smith stores.
The 80 WH Smith Local franchises – which are run as concessions within independent newsagents and convenience stores – will be wound down as contracts come to an end.
It will also see a restructure of some operational activities and a renewed focus on core ranges, such as stationery and books.
It also plans to keep slashing costs to shore up profits, having delivered savings of £12 million over the past financial year, with another £9 million earmarked for 2018-19.
Mr Clarke said its high street trading profit was still the third highest reported in the last 15 years, despite easing back.
Profits in the second half were up £1 million on a year earlier, while the decline in like-for-like sales also eased to 2% as it capitalised on the “slime” craze among children.
George Salmon, an equity analyst at Hargreaves Lansdown, said: “WH Smith is a rare beast among the UK high street names in that it’s delivering continued underlying profit growth.
“But that performance masks the fact Smith’s High Street division is facing some pretty tough challenges.”