This move comes as a fresh blow to the UK high street, which has been struggling to recover from the pandemic, witnessing a number of big name closures such as Debenhams.
ADVERTISEMENTBritish books and stationery giant WH Smith will sell 480 retail outlets to Modella Capital, the owner of Hobbycraft, in a deal worth approximately £76m (€91.2m). The Swindon-centred brand, which has been trading since 1792, will subsequently vanish from UK high streets soon. Several stores in shopping centres and retail parks will be acquired as well, although the timeline for the transition is not yet published
The high street business will be renamed TGJones, while the firm will keep the WH Smith brand for its travel business, which operates in railway stations and airports, as well as hospitals. The Post Office counters that are present in several WH Smith outlets will also keep running as usual.
Modella Capital is a private equity company focusing on consumer and retail businesses. It has already acquired The Original Factory Shop and Hobbycraft.
Currently, WH Smith has about 5,000 employees and operates over 1,100 stores across the UK.
It also owns digital brands such as greetings card business Funky Pigeon and online stationery retailer Cult Pens.
The company has also shared that it is considering other strategic options, which include the potential sale of the Funky Pigeon business.
Modella Capital said that business would function as normal while changes were made to the retail chain, which include additional product ranges. However, no details were revealed on whether layoffs may be expected due to this sale.
“As our Travel business has grown, our UK High Street business has become a much smaller part of the WHSmith Group. High Street is a good business; it is profitable and cash generative with an experienced and high-performing management team,” Carl Cowling, group CEO of WH Smith, said.
“However, given our rapid international growth, now is the right time for a new owner to take the High Street business forward and for the WHSmith leadership team to focus exclusively on our Travel business,” he added.
Russ Mould, investment director at AJ Bell, said in an email note: “In the grander scheme of things, the deal frees up management to focus on the stronger part of the group. No longer will they have to run to stand still and keep the UK stores washing their face. Instead, it’s all about growing the travel estate where the prospects are much stronger.”
However, he warned that not retaining the WH brand name on the UK high street might do more harm than good, arguing that the proposed name TGJones “currently means nothing to shoppers”.
“The WH Smith brand was the key reason why its stores managed to stay alive in a crumbling high street environment. Shoppers knew they could depend on the retailer for certain items and they kept coming back for more. Take the brand away and there is a major risk that footfall to these stores plummets under the TGJones name,” Mould added.
Fresh blow to UK high streets
The exit of the WH Smith brand name from the UK high street is expected to considerably impact high streets across the country. This is mainly because of the company’s strong brand loyalty and recognition.
High streets have been significantly weakened since the pandemic. A number of retail names have shut down lately, including Debenhams, Daniel of Ealing and Cool Britannia. Others, such as New Look, Quiz Clothing and Select Fashion, have had to shut down several stores.
This trend has impacted UK high street banks as well, with Halifax, Lloyds, Bank of Scotland and Barclays all shutting down many branches.
ADVERTISEMENTHowever, the retail sector remained more resilient than expected in February, with sales volumes inching up 1% on a monthly basis, according to the Office for National Statistics (ONS). This was ahead of market estimates of a 0.3% drop, while also bouncing back from January’s 1.4% rise.
Sales were mainly boosted by household goods, which saw the best monthly performance since April 2021. Clothing and footwear stores also contributed to this positive number, although food store sales fell.
Retail sales grew 2.2% on a yearly basis in February, ahead of analyst expectations of a 0.5% gain.
“Looking ahead, consumer spending intent is mixed. 22% of shoppers say they will spend more on garden furniture and 17% will spend more on hotels in the next three months. However, there are signs of spending pullback in other areas. For example, 39% plan to cut back on clothing, and nearly half (49%) will reduce spending on jewellery,” Sagar Shah, associate partner at McKinsey & Company, said.
ADVERTISEMENT“Zooming out, easing inflation has yet to translate into stronger sales volume growth. Meanwhile, rising wages are squeezing margins, forcing retailers to rethink their playbook- adjusting the price volume mix through discounting and tweaking promotions,” he added.
