What will a potential sale mean for WHSmith’s high street business?

In its full-year results to August 31, 2024, total travel revenues increased 11% to £1.4bn while high street sales fell 4% to £452m, showing just how much it has pivoted to travel.

A source close to WHSmith told Retail Week there is no guarantee that a sale will definitely happen, but that a “number of potential buyers” are currently interested. If a deal does go ahead, he said this could happen in the next couple of months.

He added it is not yet known if the new owner will want to keep the name, the stores, and its content exactly the same. However, he did say it will need an owner “focused on the high street”.

As a sale of its high street stores is looking likely with both Alteri Investors and Modella Capital reported to be in the mix, Retail Week takes a look at what could happen if it snaps up a buyer.

High street pressures

For city experts, they say it should be easy for the high street arm to demerge from WHSmith as it operates differently from its travel stores.

“It will be easier for shareholders to think of WHSmith as a pure travel play if the high street is no longer a part, although we believe this ship sailed a long time ago in investors’ minds,” Peel Hunt analysts Jonathan Pritchard, John Stevenson and Ruben Pathmanathan said in a note this morning.

Talks of selling its high street stores have been circulated for years, but this hasn’t meant WHSmith has abandoned these stores.

Investec analyst Kate Calvert says the high street business still generates a “reasonable” chunk of cash and is present in attractive, high-footfall locations. 

She adds the Toys R Us concessions, a wide offer of books and magazines, as well as its integral Post Offices are still appealing for customers.

“If they can’t get a price that’s reasonable, I’m sure they’ll keep it”

Kate Calvert, Investec analyst

The main issues for potential buyers are the challenges of the high street and the market position of the business.

“We suspect that the headwinds the high street chain now faces are as fierce as they have ever been,” the Peel Hunt note continues.

“National insurance contributions is a real punch in the stomach, but underlying conditions show no sign of improving as footfall continues to fall.”

A new offering

In a LinkedIn post, JDM Retail chief executive and founder Jonathan De Mello said the decision by WHSmith shouldn’t be seen as a sign that the high street is dying, but rather the business has “rightly chosen” to turn their attention to travel.

“Exiting their high street business is the right move, though it is likely they will have to sell off parcels of stores to multiple bidders, given there will be few – if any – businesses willing to take on such a portfolio in its entirety.” 

A big question is what will happen to WHSmith’s Post Offices, which is a staple of towns and cities across the UK.

PwC senior retail adviser Kien Tan says there is still a position for the Post Office in such stores as it “serves a purpose” and “gives people a reason to visit the high street” as banks have closed.

He believes any potential owners should take advantage of this, but they should add a different offering such as a coffee shop, or new product line to give the stores the “attention it deserves”.

The Communication Workers Union (CWU) which represents Post Office staff in the shops, is concerned that potential closures would be “devastating”. However, WHSmith soon told the BBC that the Post Office will remain even if a sale is complete.

Calvert can’t envision an individual or another company wanting to acquire the stores. A similar high street classic is Ryman, but she shuts down the idea that owner Theo Paphitis would be interested in WHSmith.

Alteri Investors, known for buying distressed retailers, and Hobbycraft owner Modella Capital are reported to be among those interested. Still, the Peel Hunt analysts say they would be “surprised” if many more private equity firms would be interested.

“WHSmith itself clearly has a good line of sight on how to get the most out of the chain, and it is unlikely that anyone else has the silver bullet to galvanise profitability here.”

A sale could change the face of a high street stalwart the UK has known for 230 years, but only time will tell if this is the best possible option for the retailer.