In the same week that Primark and Marks & Spencer lauded the return of shoppers to the high street, WHSmith’s focus remains on its travel business – is it missing a trick?
There is no doubt that WHSmith has takeoff once more in its growing travel business. The retailer swung back into the black in the year to August 31, reporting soaring revenues and profits which have now surpassed 2019 levels.
Its travel division returned to a trading profit of £99m during the 12 months, from a £44m loss the prior year.
Passenger numbers have been steadily improving since the peak of the pandemic and WHSmith has been expanding its store portfolio across travel locations worldwide –it opened 98 stores during the year to August 31, with plans to open 125 further locations in its current fiscal year alone.
Its high street division, meanwhile, improved its trading profit by 25% to £45m, despite receiving a fraction of the capital expenditure earmarked to fuel WHSmith’s travel ambitions.
Improving footfall – shopper numbers on high streets and retail parks were just 10.5% and 3.3% below pre-pandemic levels respectively in October, according to Springboard – has boosted retailers like Marks & Spencer and Primark, which both reported improving store sales this week.
While travel should remain a focus for WHSmith, could some TLC propel its high street stores to similar heights?
Cutting costs
When it comes to the high street, WHSmith insists its strategy “remains as relevant today as it has ever been”.
Cutting costs and driving efficiencies is the aim of the game – WHSmith said it made £42m of savings across the year, with £24m more planned over the coming three years.
The retailer said those savings came from renegotiating and exiting some leases, marketing efficiencies, and improving productivity in its distribution centres.
WHSmith closed 17 high street stores last year and 24 the previous year. Although WHSmith boss Carl Cowling tells Retail Week no more store closures are planned, some will likely shut if better rental terms cannot be agreed.
“We do spend capex on our high streets but a vast majority of it, particularly when it comes to new stores, is all about travel”
Carl Cowling, WHSmith
The retailer said: “We only renew a lease where we are confident of delivering economic value over the life of that lease.” With 450 of its 527 high street store leases due for renewal over the next three years, negotiations are already underway.
But at a time when the profitability of WHSmith’s high street arm is increasing along with like-for-like sales – and travel locations face renewed pressure if consumers scale back on holidays during next year’s anticipated recession – there is no mention of launching new shops. That marks a stark contrast to the pipeline of 150 planned at travel locations.
GlobalData analyst Zoe Mills believes rather than closing stores that cannot deliver profitability, WHSmith should be seeking to expand its portfolio into new locations such as retail parks.
She uses the example of Card Factory, which has “been moving into retail park locations” and taking smaller units alongside big box operators.
“That’s worked quite well for them,” Mills says. “There’s a potential for looking at those locations that have that high footfall that has been sustained past the pandemic and go into those as growth area opportunities.”
Investing for growth
WHSmith has the cash to do that, should it choose to. It has set aside £150m of capex for its new financial year but the “vast majority will be spent on opening new travel stores”, Cowling tells Retail Week.
“Some of it goes on the high street where we were constantly refitting stores,” he says.
“I was in a store recently, where we’re doing a complete refit and in fact putting a new roof on it, so we do spend capex on our high streets; but a vast majority of it, particularly when it comes to new stores, is all about travel.”
While some stores have received such a refresh, Mills believes WHSmith could reap rewards from accelerating that programme and from placing a greater focus on its promotional activity and merchandising.
She highlights stationery and books as two key categories where WHSmith could do more to showcase its strengths to customers – bringing trending products to the front of stores and being more active on social media, for example.
“The travel arm talks a lot about learning from InMotion but it should be applying these lessons to the high street operation”
Wendy Massey, Retail Week Prospect
But she also suggests the retailer could transplant some of the successful elements from its travel stores into high street locations.
“WHSmith is seeing good growth opportunities [in travel] because it is expanding the ranges and driving average transaction values – there should be the same sort of approach for the high street.”
Retail Week Prospect analyst Wendy Massey elaborates on that idea, suggesting the expanded tech proposition that has worked so well for WHSmith in travel could also resonate with shoppers in high streets, retail parks and shopping centres.
“WHSmith could think about bringing in a better tech offer on the high street, in partnership with InMotion, which offers premium brands like Apple, Bose and Sony and focuses on providing a great customer experience,” she says.
“The travel arm talks a lot about learning from InMotion but it should be applying these lessons to the high street operation, too.”
Massey believes third-party partnerships could also help propel WHSmith’s high street division into a new phase of growth. Last month, Toys R Us revealed it will open concessions in nine WHSmith shops during the first half of next year, selling a curated range of toys and games.
WHSmith may well argue ’if it ain’t broke, don’t fix it’ with regards to its high street blueprint of reducing costs to boost profits. But at a time when stores are experiencing a post-pandemic resurgence, WHSmith must not underestimate the power of the high street.
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