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