WH Smith restructures high street arm amid retail gloom
One-off costs of the review sent statutory group pre-tax profits down 4% to £134m for the year to August 31.
Retailer WH Smith has launched an overhaul of its under-pressure high street business as it revealed sliding sales and profits at the division.
The group said it has kicked off a detailed review of the high street business which will see it close six stores and wind down trials such as its 20-strong Cardmarket chain and franchised convenience store arm WH Smith Local.
WH Smith – which has 839 travel outlets and 607 high street stores in the UK – said the move was designed to “better structure the business for the future”.
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. Stephen Clarke, chief executive WH Smith
It will also see a restructure of some operational activities and a renewed focus on core ranges.
One-off costs of the review sent group pre-tax profits down 4% to £134 million for the year to August 31.
Shares tumbled as much as 12% after the results, with the stock also under pressure amid a wider market sell-off.
But with these costs stripped out, underlying pre-tax profits rose 4% to £145 million.
WH Smith saw trading profits in its high street stores fall 3% to £60 million, but this was offset by a 7% rise in profits at its travel arm to £103 million.
The group said high street like-for-like sales dropped 3%, although it said the “slime” craze helped drive an “encouraging” performance in the final six months.
Sales rose 3% across its outlets based in airports and train stations.
Stephen Clarke, group chief executive of WH Smith, said: “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.”
Under the restructure, WH Smith plans to close the 20 Cardmarket stores as their leases come to an end, with affected staff transferring to nearby WH Smith stores.
The WH Smith Local franchises – which are run as concessions within independent newsagents and convenience stores – will be wound down as contracts come to an end.
It also plans to keep slashing costs to shore up profits, having delivered savings of £12 million over the past financial year, with another £9 million earmarked for 2018-19.
WH Smith said in its full-year results that, despite falling, its high street trading profit was the third highest reported in the last 15 years.
It said profits in the second half were up £1 million on a year earlier, while the decline in like-for-like sales also eased to 2%.
George Salmon, an equity analyst at Hargreaves Lansdown, said: “WH Smith is a rare beast among the UK high street names in that it’s delivering continued underlying profit growth.
“But that performance masks the fact Smith’s High Street division is facing some pretty tough challenges.”