New chap­ter for WH Smith as its travel shops beat high street units

The Daily Telegraph - Business - - Business - By Ash­ley Arm­strong

WH SMITH gen­er­ated higher sales from its travel shops than its high street stores for the first time in its 225-year his­tory on the back of a surge in tourists splurg­ing on Union Jack sou­venirs and in­ter­na­tional growth.

The com­pany recorded over­all sales growth of 2pc to £1.2bn for the year to Aug 31, driven by a 9pc boost in its travel busi­ness, which helped to off­set a 5pc drop in high street stores. Pre-tax prof­its rose 7pc to £140m.

For at least the last five years WH Smith has man­aged its high street es­tate for profit in the face of steadily de­clin­ing sales while fo­cus­ing on grow­ing its travel busi­ness by adding more shops in UK train sta­tions and air­ports as well as a ma­jor in­ter­na­tional push.

Travel now ac­counts for 60pc of WH Smith’s group trad­ing profit and just over 50pc of to­tal sales.

Stephen Clarke, group chief ex­ec­u­tive, said that de­spite the slide in high street sales the di­vi­sion had per­formed well as it had matched the strong profit per­for­mance last year when the busi­ness en­joyed a huge boost from the adult colour­ing book craze.

“The colour­ing book trend was a huge driver of sales so I’m pleased that even with­out that and the chal­leng­ing en­vi­ron­ment we have main­tained our trad­ing prof­its at £62m,” the re­tail boss said. WH Smith has held its high street prof­its steady by mak­ing £12m of cost sav­ings on stores and in­ven­tory. The busi­ness said that it had iden­ti­fied a fur­ther £9m of cost cuts that can be made over the next three years.

The com­pany now has 582 travel shops dot­ted around the UK’s train sta­tions and air­ports and a fur­ther 225 in­ter­na­tional stores af­ter seal­ing deals to open in Sin­ga­pore and Rome. The travel di­vi­sion grew trad­ing prof­its by 10pc to £96m dur­ing the year.

“We con­tinue to think the com­pany’s travel growth is un­der-ap­pre­ci­ated,” said RBC an­a­lysts. “On the high street we see po­ten­tial for fur­ther cost sav­ings to be an­nounced driven by lower ren­tal costs at lease re­newal, greater use of tech­nol­ogy and con­tact rene­go­ti­a­tions for goods not for re­sale.”

Mr Clarke said that the UK’s travel shops had been boosted by a jump in over­seas vis­i­tors who are tak­ing ad­van­tage of a weaker pound and snap­ping up Union Jack hood­ies, fridge mag­nets, boxes of short­bread and WH Smith’s own 225th an­niver­sary mem­o­ra­bilia.

He said that while over­seas shop­pers

‘The colour­ing book trend was a huge driver of sales so I’m pleased even with­out that we’ve kept our prof­its’

were once worth just a sixth of the value of a Bri­tish shop­per to the busi­ness, they have now risen to half the value. Of­fi­cial data showed that tourist num­bers hit a record in July adding to ev­i­dence that the weak pound has made tourism a big ben­e­fi­ciary of last year’s Brexit vote.

Mr Clarke said there were no signs that peo­ple were curb­ing their holidays in spite of slow­ing wage growth and ris­ing in­fla­tion. He added that de­spite the Ryanair chaos and Monarch’s re­cent col­lapse the im­pact was “on the fringes”.

WH Smith raised its div­i­dend by 10pc to 33.6p a share, mean­ing the re­tailer has now achieved 10 years of un­bro­ken share­holder pay­out growth.

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