WH Smith has quit the high street after 233 years with the sale of its shops to Modella Capital, the owner of Hobbycraft, for £76 million.
The British retailer had been looking to offload the business to focus on its fast-growing travel arm.
The WH Smith brand is not included in the sale, meaning the name will disappear from the high street. The shops will be rebranded TG Jones, but will keep the same products and services, including the Post Office and Toys “R” Us.
The travel divisions will continue to trade under the WH Smith brand in 32 countries, including at major airport locations, hospitals and railway stations in the UK.
The high street shops employ 5,000 people across 480 stores, and all these stores, staff, assets and liabilities will move under Modella Capital’s ownership.
The London-based private equity company also owns Hobbycraft, the chain selling arts and crafting supplies, and The Original Factory Shop, the discount store chain.
Carl Cowling, chief executive at WH Smith, said: “This is a pivotal moment as we become a business exclusively focused on travel. As our travel business has grown, our UK high street business has become a much smaller part of the WH Smith Group.
“High street is a good business; it is profitable and cash-generative, with an experienced and high-performing management team. However, given our rapid international growth, now is the right time for a new owner to take the high street business forward.”
WH Smith was established in London in 1792. The first store was opened by Henry Walton Smith and his wife Anna in Little Grosvenor Street in Mayfair. The company opened the first travel retail store in Euston station in 1848.
The high street arm has been stuck in long-term decline as the expansion of supermarkets and discounters and the rise in online shopping have combined to lure customers away from the high street.
In recent years the business has been propelled by its more lucrative retail travel business, which makes up 75 per cent of the group’s revenue and 85 per cent of its trading profit.
The new owner will need to contend with subdued consumer spending and rising costs. Increases in the minimum wage and employers’ national insurance contributions, announced at last October’s budget, were expected to add £20 million to WH Smith’s cost base this year.
Modella, which runs 800 shops under the various brands it owns, said it had decided to rebrand the company as TG Jones to give the same “family” feel as the revered WH Smith brand.
“TG Jones feels like a worthy successor to the WH Smith brand,” a spokesman said. “Jones carries the same sense of family and reflects these stores being at the heart of everyone’s high street.”
Modella added that it was “very much business as usual” while it looked to “define and execute” a strategy for the retailer and introduce new offerings.
WH Smith is among a number of well-known names to disappear from the high street in recent years; Debenhams, Topshop and BHS have also gone amid the shift to online shopping.
Nicholas Found, an analyst at Retail Economics, believes the sale “marks a significant chapter in the evolution of this iconic retailer”.
He said: “The move for WH Smith is a clear reflection of the structural pressures squeezing legacy high street retailers. With falling footfall, rising business rates and wage inflation, the economics of the high street have become increasingly unforgiving, with many grappling to find relevance in a digital-first era.
“It’s early days for Modella Capital and its plans for the acquired business, but the private equity firm has a track record of reviving challenged brands. While WH Smith’s name may be disappearing from the high street, it’s not the end of the story, with it now starting a new chapter for the high street arm under the name TG Jones.”
As for WH Smith, Peel Hunt analysts said: “Management can now concentrate solely on the travel business, rather than having to worry about the structurally challenged high street division. Investors also get a better line of sight on the true growth dynamics of the travel business.”
Analysts at RBC Capital expect WH Smith to return to a “strong long-term travel growth with cash returns equity story”. They added: “We believe WH Smith’s forensic approach to retailing should mean it is well placed to expand successfully in the global travel essential retail segment, although its Rest of World business is still somewhat unproven in terms of profitability.”
WH Smith shares fell 2.7 per cent, or 29p, to £10.61 in afternoon trading on Friday.
