‘Store closures could be material in somebody else’s hands, but WH Smith itself, clearly, has a good line of site on how to get the most out of the chain, and it is unlikely that anyone else has the silver bullet to regalvanise profitability here’
Workers at WH Smith face uncertainty as private equity suitors are considering proposals to buy the retailer’s high street outlets.
It comes after the iconic UK firm said it had engaged in discussions concerning a potential sale of its substantial network of 500 high street stores. The company has disclosed that it is contemplating its options for this segment, with an intention to concentrate more on its expansive travel business operation.
It is understood private equity groups Hilco and Alteri are among parties to raise interest over a possible takeover move for the business, after WH Smith launched the process late last year.
Although the expertise of Hilco and Alteri could suggest a reshaping of WH Smith, employees are left to wonder what implications a buyout by such suitors would have on the future of the approximately 5,000-staffed high street empire.
Peel Hunt market expert, Jonathan Pritchard, said that while there isn’t much wriggle room for a new owner to scale back jobs in the name of efficiency gains, considerations for intensified store shutdowns might be on the table.
He remarked: “It is hardly as though this is a fat business, with lots of inefficient processes and store staff dossing about. Quite the opposite. Store closures could be material in somebody else’s hands, but WH Smith itself, clearly, has a good line of site on how to get the most out of the chain, and it is unlikely that anyone else has the silver bullet to regalvanise profitability here.”
WH Smith is reportedly set to keep the name for its booming travel division, potentially excluding the high street brand from any sale deal, or it may involve a licensing agreement. This detail is tipped to be a central talking point in negotiations with interested parties.
Shares for WH Smith saw an upturn on Monday, fuelling speculation among investors of a lucrative sale coming their way. Industry experts speculate that the retailer’s high street arm could fetch upwards of £100m in imminent months. Mr Pritchard projects a possible selling price tag between £100m and £130m, based on recent earnings performance.
Earnings for WH Smith’s traditional high street outlets have stayed constant at £32mi, despite a modest 2% dip in like-for-like sales, largely thanks to cost-cutting measures. Meanwhile, Investec analyst Kate Calvert forecasts a dip in earnings for the current year to around £27m.
Ms Calvert remarked: “This is not a surprise and has been an obvious next step in the group’s evolution for a number of years given the investment focus has been on travel for a long time.”
“Over the past decade, WH Smith has become a focused global travel retailer,” underscoring the business’s transformative journey.
“The group’s travel business has over 1,200 stores across 32 countries, and three-quarters of the group’s revenue and 85% of its trading profit comes from the travel business.” There can be no certainty that any agreement will be reached, and further updates will be provided as and when appropriate.”
Hilco chose not to comment on the matter. Alteri has been approached for a statement.
