WH Smith has been shifting its focus away from the UK high street, where a host of retailers have struggled to grow sales as shoppers shift to online.
It has been gradually lowering its investment in this part of its business, adopting instead what it calls a “profit-focused strategy”. The strategy has served to push up gross margins and deliver cost savings.
Like-for-like sales in its high street stores were down 1% in the three months ended June 2 compared with the same period a year earlier.
But group like-for-like sales climbed 1%, as WHS positions itself to take advantage of the growing number of road, rail and plane passengers.
Total sales in the travel division rose 8% year-on-year, with like-for-likes up 3%. WH Smith’s food offering performed particularly well, the FTSE 250 company said.
The investment being pulled from the high street is being ploughed into service stations, airports and the like, with WHS planning on opening between 15 and 20 new sites in the UK this year.
WH Smith is also expanding abroad to try to reduce its reliance on the ailing UK high street, with 18 new stores slated to open later this year, including eight at Madrid Airport.
“We have delivered a good sales performance in the third quarter in both our Travel and High Street businesses,” said chief executive Stephen Clarke.
“Whilst there is some uncertainty in the broader economic environment, WHSmith serves millions of customers each week and continues to grow both internationally and in the UK.
“We continue to focus on profitable growth, cash generation and investing in the business to position us well for the future. We remain confident in the outcome for the full year.”
Shift away from high street a ‘masterstroke’
“Continued underinvestment in the High Street side of the business should not cloud the view that WH Smith is building a strong brand in Travel that has significant room to grow overseas,” said Markets.com analyst Neil Wilson.
“This significantly reduces its exposure to the ailing UK high street – a strategy that increasingly looks like a masterstroke.
“While high street footfall is coming off, global air travel passenger growth is only heading up, and fast.
Shares rose 4% to £20.56 in early deals on Wednesday.
--Updates for CEO comment, analyst comment and share price--