It’s been a big week for the high street. First came news that the WH Smith name would disappear from our high streets, after boss Carl Cowling admitted the selloff to focus exclusively on travel stores would make it impossible for the WH Smith brand to coexist under a separate owner (though he didn’t clarify if WHS would be allowed).
Now comes news Poundland could be put up for sale under plans outlined by owner Pepco to exit the fast-moving consumer goods sector.
With 500 WH Smith stores up for sale and 750 Poundland stores on the block (plus the 75 or so in Ireland), it begs the question: who would want to buy so many struggling stores at such a challenging time?
High street decline
In the case of WH Smith a couple of turnaround firms – Alteri and Modella – are reported to be interested. But one wonders if the high street sites are more valuable without attempting to mimic the marginalised and increasingly expensive range of this specialist multiple CTN?
It’s in a host of declining categories that almost the entire convenience trade has sought to reduce its exposure to, while online giant Amazon dominates on the books side.
And with an extra £20m in NI and minimum wage costs from April, the £32m that the high street stores make in profit could quickly be wiped out without (or even with) the WH Smith fascia above the shop front.
A Poundland merger?
A similar challenge awaits Poundland. While costs are going up and sales plummet, the range is expensive. Even as it backtracks to the single price point on which the business was built, with newly-returned MD Barry Williams working on a turnaround, its business model has been undermined by inflation.
As one supplier said: “What can you buy for a quid? Almost everything costs more than a quid now.”
All this while competition from variety discounters like Home Bargains and The Range, as well as Aldi, Lidl and the supermarkets, is stronger than ever. There’s also B&M of course. And online.
The only obvious buyer is Poundstretcher owner Fortress. Would a merger with the 300-strong Poundstretcher create a more powerful proposition? Perhaps.
And with ex-Amazon boss Doug Gurr running the Competition & Markets Authority, and the high street in turmoil, it might not have to suffer the agonising Phase 2 investigation Poundland had to go through to acquire 99p Stores. But it’s a tough turnaround, and one of many that’s needed in the sector.
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