Analysis: Why another safe pair of hands is the right move for WHSmith

Clarke will step down as chief executive of WHSmith in October to “take a break” after an impressive near 15-year tenure at the books and stationery retailer, the last six of which were spent at the helm.

Under his leadership, WHSmith’s share price has nearly trebled from £7.57 in 2013 when he took the reins to £22.22 in 2019.

During his time at the helm of the retailer, Clarke continued his predecessor Kate Swann’s travel business legacy and powered on with changing the mix of business from predominantly books and stationery to travel shops – a division which has delivered record profits every year and now accounts for 70% of the overall business.

“WHSmith has got a strong reputation for grooming its successors internally”

Fran Minogue, Clarity Search

Peel Hunt analyst Jonathan Pritchard says Clarke has taken WHSmith from a “dull high street business under pressure to a global player”.

WHSmith’s international business has also doubled since he became boss, and is now present across 30 countries.

Clarke has also diversified the the retailer’s proposition through the rollout of various new store formats such as Tech Express in the UK and overseas, the recent acquisition of US-based travel electricals business In-Motion and the trial of a Well’s Pharmacy partnership in Gatwick Airport.

In its third-quarter results posted this week the retailer recorded a 15% uplift in total group sales as a 1% fall in high street sales was offset by a 26% jump in sales across its travel division.

Successors

Along with those results came the news that Carl Cowling, the retailer’s current high street managing director, will be taking over from Clarke in an appointment that’s not been too dissimilar from his own journey to the top.

“WHSmith has got a strong reputation for grooming its successors internally,” Clarity Search managing partner Fran Minogue explains. 

Kate Swann – now chief executive of SSP Group and who was succeeded by Clarke – was also moulded within the business to take over the reins, successfully fulfilling various roles for WHSmith before being made chief executive.

Like Cowling, before taking over as boss of WHSmith Clarke did a stint as managing director of the high street division from 2008 to 2013, prior to which he was the retailer’s commercial and marketing director.

Although Cowling has big shoes to fill stepping into Clarke’s role, the same could be said for Clarke when he took over from Swann, who was heralded in the City for her successful turnaround of WHSmith when she stepped down in 2013.

High street troubles

So will Cowling make it second time lucky for WHSmith appointing a chief executive who lives up to the reputation on their predecessor when he takes over the reins in November? 

Minogue says Cowling, who headed up the travel business for two years before being put in charge of “the more troubled division of the business” – the high street – in 2017, has already proved he can hold the fort.

Despite high street sales falling for the last three consecutive quarters, Minogue is confident that Cowling has proved he can “control cost and hold the line”.

“He’s done well in holding the sales line and making sure the categories are relevant on the high street while keeping focus on cost,” Minogue says.

But against the backdrop of sluggish high street sales, does WHSmith need someone at the helm with a fresh perspective to make this division of the business thrive?

Former vice president of WHSmith and managing director of Calliope Gifts Philip Downer says: “A safe pair of hands certainly worked last time around and the planning of internal succession looks to have gone extremely well.

“It’s difficult to argue with the level of success and return they’ve achieved over the last two years.

“I’d love to say confidently they should be pouring more money into capital investment in the high street, but I’m not convinced that as a high street retailer that would be the best use of their time.”

By continuing to “expand the international business, winning more airport contracts and making judicious acquisitions”, Minogue says there’s no reason why Cowling can’t have the same success as his predecessors.

And City analysts aren’t put off by the forthcoming change in leader either.

Peel Hunt’s Pritchard says choosing Cowling as the new boss is a “de-risked” appointment.

“He’s part of the decision-making team anyway and inside the tent,” he says. “He will be familiar with what’s going on.”

“Travel in general, travel in hospitals and In-Motion in the States are all growth angles to keep him going in, so if he comes in and does something different it will be a surprise,” Pritchard adds.

Despite not being immune to the high street’s ongoing travails, WHSmith has proved it has form with internal appointments which carry on the business’ strategic direction.

Cowling’s appointment shows that evolution, not revolution, is the way forward for WHSmith.