WH Smith focuses on travel retail while exiting high street stores

In recent months, WH Smith, a well-known retailer, has undergone significant changes, particularly in its business strategy. The company, primarily operating in the UK, has decided to sell its high street division comprising approximately 500 stores to Modella Capital. This marks a strategic shift as the company aims to focus on its successful travel retail operations, which have become increasingly crucial to its financial health. The sale appears to be a response to the challenges faced by brick-and-mortar retailers as consumer preferences shift towards online shopping. It has been reported that WH Smith's travel retail sector currently accounts for around 75 percent of the company’s revenue and 85 percent of its trading profit. The high street division’s performance had struggled in recent years, contributing to a 20 percent decline in WH Smith's share price. Analysts and investors have generally welcomed the decision to divest from the high street, viewing it as a necessary move to strengthen the company's focus and growth prospects within the travel retail market. Modella, known for its previous acquisitions in the retail sector, plans to rebrand the stores under a new name, TG Jones, emphasizing a family-oriented appeal. This decision underscores a broader trend affecting numerous retail businesses that continue to grapple with the increasing dominance of digital shopping. Furthermore, WH Smith has set ambitious goals for its future growth, particularly in North America, which is identified as the world’s largest travel market. The company currently holds a 14 percent share of the U.S. airport retail market, with plans to increase that share to over 20 percent by the year 2028. Investment firms, like Investec, suggest that WH Smith is operating in a structurally growing marketplace with significant opportunities to capture additional market share in the U.S. and Europe. Analysts from RBC Capital express confidence in WH Smith's potential for strong long-term growth driven by its travel business and its strategic focus on essential retail. The decision to exit the high street operations reflects a larger trend impacting traditional retailers, whose sales have been affected by changing shopping habits and consumer critiques of outdated store formats. As WH Smith pivots towards its core strengths in travel retail, it aims to navigate these challenges and position itself for sustained success amidst evolving consumer preferences and competitive landscapes in the retail sector.