Why WHSmith boss Cowling sees ‘big opportunity’ from the pandemic

The retailer’s typically outperforming travel division has been hit particularly hard, with sales tumbling 32% on a total basis and 43% on a like-for-like basis at a time when train stations and airports have been operating well below capacity.

WHSmith’s high street stores, meanwhile, have fared more favourably, thanks in part to the fact that all stores containing Post Offices were allowed to remain open during the first lockdown, while almost all its sites can trade as normal under November’s second wave of national government restrictions.

Sales in its high street stores have now climbed to 92% of 2019 levels, while that arm of the business returned to profitability during September and October.  

Following a turbulent year, WHSmith boss Carl Cowling is determined to ensure that both its travel and high street divisions “emerge stronger” from the current crisis.  

Driving ATV

A key focus for WHSmith throughout the pandemic has been to drive both average transaction value (ATV) and conversion rates up, although the retailer refused to be drawn on the exact numbers that have been achieved.

The health crisis has sparked more intentional shopping, with customers looking for specific items rather than browsing. Cowling believes the retailer can capitalise on this by extending its ranges and adding more product categories.

In the case of airports, the retailer unveiled its new-look store in Heathrow Terminal 2 earlier this year, offering a range of health and beauty items and a pharmacy alongside WHSmith’s usual categories of books, gifts and snacks.

“If our ATV carries on as it is, and passengers improve, then our operational strength will grow as we come out of this pandemic”

Carl Cowling, WHSmith

Cowling says the format has been well received by both customers and airports – with a wider rollout into more locations planned.

“We’re making sure that our sales are ahead of our passenger numbers and this will mean as passenger numbers start to improve, we’ll be in a much better position,” Cowling explains.

“If our ATV carries on as it is, and passengers improve, then our operational strength will grow as we come out of this pandemic.”

In its high street stores, WHSmith has started to zero in on the work-from-home trend that has exploded over the last few months, broadening its range of accessories and hardware for shoppers kitting out their home offices. 

Cowling believes there is “a big opportunity” in such categories as other players retreat from the high street. 

“We’ve always had a small range of electrical accessories, but we’ve done a really great job in our travel business in terms of all of those different gadgets – headphones, all the stuff that makes your hardware work – and I think there’s now an opportunity for us to start selling those on the high street,” Cowling says.

“We’ve launched electrical accessories in just over 500 stores and we’ve expanded our range of ink. If a mouse is broken or a keyboard is broken, we’ve got back-up products there. We’ll be selling printers and shredders. I think that’s going to be an emerging category for us going forward.”

Travel rebound?

Outside the UK, WHSmith is already seeing green shoots of recovery in its US travel division – now its biggest international market, accounting for more than 50% of the retailer’s international stores. And WHSmith is determined to further grow its American footprint.

After completing the acquisition of Marshall Retail Group (MRG) in December 2019, the retailer has set about launching a series of specialist airport stores.

Despite the pandemic, MRG opened eight new stores during the financial year, including sites in San Francisco, Denver and Newark airports. Including its tech fascia InMotion, it has also secured a further 39 locations that are yet to open. 

Cowling is confident that its US travel division will rebound faster than the rest of the world since 85% of flights taken in the country are domestic.

Passenger numbers in the US are currenly at 35% of 2019 levels, but WHSmith’s overall US sales reached 44% of last year’s total during October. That, however, was aided by a 10% increase in Americans driving to Las Vegas – MRG operates 70 stores in Sin City. 

But when will travel fully bounce back? News of a potential Covid-19 vaccine this week was certainly welcome – it sent WHSmith’s share price surging 29% as investors ploughed back into physical retail. Yet, for a business with such a reliance on travel locations, there could still be some hard yards ahead.  

“We are prepared for it if it carries on longer than six months – our working assumption is a gradual recovery. I don’t think there’s anything to be gained from being too optimistic”

Carl Cowling, WHSmith

“For planning purposes, we’re making the assumption that passenger traffic won’t improve at all over the next six months,” Cowling says.

“If we see an upside that’s great, and we will be able to react very quickly to that, but we think it’s prudent to just assume everything stays as is for the time being. 

“We are prepared for it if it carries on longer than six months – our working assumption is a gradual recovery from then anyway. I don’t think there’s anything to be gained from being too optimistic.”

With so many uncertainties across all elements of the business, Cowling plans to focus on elements firmly within his control: opening new formats and broadening ranges in existing stores. 

It is yet to be proven whether adding new categories to an already eclectic product mix is the way to go, but WHSmith’s commitment to investing in new ideas and formats shows the retailer is ready for whatever comes its way.