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WH Smith abandons initiative to resuscitate its declining High Street estate

“During an encouraging second half, the High Street business traded well and we quickly identified the latest trend in the market, becoming a one-stop-shop for all slime related products," said Stephen Clarke, the group's CEO
Wh Smith travel outlet
Shares in WH Smith were trading at 1,895p, except at WH Smith's, where they were priced at £20 ...

Shares in WH Smith PLC (LON:SMWH) were on offer early doors after the stationery and books seller signalled a further retreat from the High Street.

The company said it expected to take a £9mln charge, around £4mln of which was recorded in the financial year just ended, as a result of a decision to increase the focus on its core categories; wind down non-core trial initiatives (including Cardmarket and WHSmith Local); restructure some operational activities; and close around six High Street stores (particularly those affected by onerous leases).

Adjusted group profit before tax in the 12 months to the end of August rose 45 to £145mln from £140mln the year before. Reported profit before tax fell 4% to £134mln from £140mln the previous year.

As per usual, the company’s chain of shops in travel hubs (e.g. airports and stations) outperformed the High Street estate.

Trading profit for the Travel business rose 7% to £103mln from £96mln while for the High Street segment it fell 3% to £60mln from £62mln.

Group revenue rose 2% to £1.26bn from £1.23bn the previous year and was flat on a like-for-like basis. The Travel business showed a 3% year-on-year increase in LFL sales but this was cancelled out by a 3% fall in LFL sales on the High Street.

The business remains highly cash generative, enabling the board to propose a 12% increase in the total payout to 54.1p from 48.2p the year before, while the share repurchase scheme has been renewed, with £50mln earmarked to buy back shares.

READ: WH Smith delivers more of the same

"We had a good year in High Street despite the well-documented challenges of the UK high street. During an encouraging second half, the business traded well and we quickly identified the latest trend in the market, becoming a one-stop-shop for all slime related products. Despite this good performance, we are not ignoring the broader challenges on the UK high street and, during the second half, we conducted a business review to ensure our High Street business is fit for purpose now and for the future,” said Stephen Clarke, the group’s chief executive.

Richard Hunter, the head of markets at interactive investor, said the higher margin, “almost monopolistic presence” that its Travel business has in airports, train stations and motorway services has again borne fruit.

“Its increasingly important contribution to the WH Smith brand both domestically and internationally is a clear centre of strategic focus for the group and continued investment is most likely,” Hunter said.

“Meanwhile, the High Street business remains a thorn in the side, with revenues and trading profit both down 3%. Cost savings and a sharp focus on margin management are the main constituents of a defensive strategy as the wider retail sector has shown signs of buckling under pressure. In the meantime, the cost of a review of this division is an additional weight,” he added.

The shares were off 6.4% at 1,895p after half an hour of trading, having fallen as low as 1,859p at one point. At the current price, the shares yield 2.85% based on the full-year dividend announced today.

Independent retail analyst Nick Bubb said today’s results showed continued progress in overall profit before tax, earnings and dividends, thanks to the lucrative Travel division.

“But there are a few exceptional write-offs flying around, as a result of a strategic review of the much-maligned High Street Division,” Bubb observed.

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WH Smith PLC Timeline

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October 11 2018
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