WH Smith sought to justify a decision to hoist the ‘for sale’ flag over its high street stores this week with a strong set of results for the Travel arm of the group.
The FTSE 250 company reported a 6% rise in revenues in the Travel division, boosted by higher footfall in its airport and train station stores.
By contrast, the ailing high street chain recorded a like-for-like sales fall of 3% for the 21 weeks to 25 January.
Overall, the group reported a 3% boost to the top line across the entire business compared with the same period a year before.
Its share price rose 8% following the results on Wednesday, bringing its total gain for the week to more than 12% as investors welcomed news of the potential for a more focused travel group.
“It’s no coincidence WH Smith announced the potential sale of its UK high street operations just before reporting good trading for the Travel arm,” said Russ Mould, investment director at AJ Bell. “It needed the core business going forward to be firing on all cylinders to justify the strategic shift.”
While many investors are keen on a more streamlined business, there remained doubts over whether WH Smith could negotiate a good price given the present difficulties facing British retail.
Broker Peel Hunt estimated the business could be worth around £100m.
“It is hardly as though this is a fat business, with lots of inefficient processes and store staff dossing about. Quite the opposite,” added Peel Hunt analyst Jonathan Pritchard.
“Store closures could be material in somebody else’s hands, but WH Smith itself, clearly, has a good line of sight on how to get the most out of the chain, and it is unlikely anyone else has the silver bullet to regalvanise profitability here.”
Over in North America, WH Smith’s Travel arm is regaining momentum with like-for-like revenue up 3%. The US business now has a pipeline of around 60 stores to open, after winning eight sites at Orlando Airport and a further four in Portland.
“The future of WH Smith now rests with getting travellers to pay the price for convenience,” said Mould. “Its stores at transport hubs take advantage of a captive audience – people don’t have time to shop around, they simply want to pick something up quickly before they catch a train or flight.”
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