​WHSmith: Can its new owners make the high street business actually work?

While it will continue to operate in travel locations, the name will soon disappear from the high street and rebrand to TGJones, which Modella says “carries the same sense of family”.

WHSmith has consistently emphasised that the high street division is cash generative and profitable, but its near 500 stores only account for 25% of the group’s revenue.

But what can a new owner, rebrand and potential new categories bring to Britain’s high street mix? Retail Weeks explores whether the business can not only survive, but even thrive, with a new name and owners?

What’s in a name?

Modella recently laid out its short-term plans for the acquired stores, revealing it will keep the same products and services including the Post Office and Toys “R” Us. It will then look to “define and execute” to introduce new ranges and other categories.

Investec analyst Kate Calvert told Retail Week that it’s hard to determine future success until we see the new format of stores.

“Money needs to be spent on the stores and they’ve got to come up with a new concept,” she said. “The Post Office and Toys “R” Us will help footfall, so it is a practical solution to keep these. There is a need in the community for this and these stores serve a purpose.”

She added that the stores are a draw for people who want to pick up books, stationer and gifts, and she expects this will continue once TGJones pops up on the high street.

A fresh new name and brand is unlikely to deter customers according to Calvert, but other industry experts are less optimistic about its future.

Global Data lead retail analyst Zoe Mills said a significant challenge for Modella is the loss of the WHSmith name.

“Given its long history and the affection it is held in by consumers, it is not clear how easily a transition to TGJones will be received.”

The rebrand is the beginning of a new direction for the retailer, but Future Brand chief strategy officer Jon Tipple believes it has focused on “fictional heritage and nostalgia” rather than creating a bold new brand.

He added that it’s unclear if TGJones can recapture the lost spark WHSmith once had.

“For Modella’s heritage strategy to succeed, family values must genuinely permeate through every employee interaction and customer experience, to become deeply embedded into the company’s DNA” he says.

AJ Bell investment director Russ Mould said in a note that the name “currently means nothing to shoppers” and it risks being lost in a crowd.

He added it will have to do “something remarkable on pricing” to entice shoppers, or it could end up “striking deals to turn individual stores into alternative use.”

A fresh start

WHSmith stores have average remaining lease lengths of under two years, which Mills pointed out means Modella is not obliged to keep unprofitable stores open for long.

Instead, the owner can focus on shutting inefficient stores and improving the remaining stores. 

Modella has experience in acquiring retailers as it bought Hobbycraft in August and The Original Factory Shop in February. It’s also got its eye on Lakeland.

Mills continued to say that Modella “should be a good fit” as a WHSmith high street owner, as it can use its learnings from Hobbycraft to give these locations a “much-needed injection of cash to bring them up to scratch”.

Calvert echoed this, adding that the aforementioned purchases by Modella are “quite new” and she can see crafts and value-led products being brought into TGJones.

“It will probably take on The Works a bit more if that happens,” she remarked. “Could even be a bit more competition for them.”

The transaction is set to be complete in the final quarter of WHSmith’s financial year, and TGJones will operate under chief executive Sean Toal.

It may be hard to imagine what TGJones will look and operate like once up and running, but Toal’s experience in leadership roles at Co-op, Wilko, and his five years as WHSmith high street managing director puts him in a great position to lead this change.