WH Smith is on track to finalise the sale of its UK high street chain to Modella Capital, the owner of Hobbycraft, by the end of this month.
The £76 million deal, agreed upon in March, will result in the WH Smith brand being replaced by TG Jones on British high streets. As part of the agreement, approximately 480 stores and 5,000 employees will transition to Modella Capital’s ownership.
In an update released ahead of the sale’s completion, WH Smith reported strong performance in its remaining travel division, which includes shops in airports, train stations, and hospitals. Like-for-like sales in this division increased by 5 per cent in the quarter ending 31 May.
The company did not disclose third-quarter figures for the high street arm due to the impending sale. However, half-year results in April revealed a 25 per cent decline in profits for the chain, falling to £20 million.
In the UK, its travel arm delivered a 6 per cent rise in like-for-like sales over the third quarter, with airport shops outperforming the rest of the estate, with a 7 per cent rise.
It said it recently opened its first Smith Family Kitchen coffee offering in an airport, as well as a new standalone bookshop.
Across its North America travel chain, comparable store sales rose 2 per cent but were up 7 per cent on a total and constant currency basis.
In the rest of the world, like-for-like sales were 7 per cent higher and surged by 12 per cent on a total and constant currency basis.
The group said: “While we are mindful of the broader economic and geopolitical uncertainty, the group is well positioned as we enter our peak summer trading period.”
The sale of its high street arm comes after years of under-pressure sales and profits at the division, while WH Smith’s travel business has grown to make up the bulk of its sales and profits, with more than 1,200 stores across 32 countries.
Buyer Modella Capital specialises in investing in retailers.
It has previously put money into chains including Paperchase and Tie Rack, while in August last year, it snapped up arts and crafts retailer Hobbycraft for an undisclosed sum.
Russ Mould, Investment Director at AJ Bell, said: “With the sale of its high street business set to complete in a matter of weeks, WH Smith’s trading update presents a picture of what the slimmed-down company looks like going forward. It’s all about convincing time-pressed travellers to pay a premium for goods on the go.
“It’s a starting point for investors to better understand the shape and potential of the business, and to get a feel for growth rates over the long term from what is essentially now a travel-hub company with a few shops in hospitals on the side. With that in mind, there is a sense that investors might be expecting more from WH Smith than it is currently delivering.
“The US has been a laggard for the group in recent years and has some catching up to do. Overall, WH Smith needs to step up a gear and prove it was worth flogging the cash cow that was the UK arm.”
