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WH Smith’s move away from the high street is paying off

The retailer has been pulling investment from its high street stores and putting it into the ‘travel’ side of its business, which is benefitting from an increase in plane and rail passengers

wh smith store at train station
Travel makes up almost half of WH Smith’s profits and will likely become the main driver soon

Wednesday’s third-quarter update from WH Smith PLC (LON:SMWH) was the continuation of a familiar story for the retailer: its growing ‘travel’ business offsetting declines in its high street business.

Like most of its high street peers – Carpetright PLC (LON:CPR), House of Fraser and Mothercare PLC (LON:MTC) to name a few – WHS has struggled as more and more people go online to do their shopping.

READ: Q3 sales rise on another strong performance from travel division

The FTSE 250-company has adopted a “profit-focused strategy” in this side of its business which, in layman’s terms, means it has cut spending in its highs street stores to try to boost margins.

So far it seems to be working, with sales down in the third quarter but gross margins improved while costs fell.

The investment being pulled from the high street has been redirected into its outlets at service stations, airports and the like.

The rationale is simple: high street footfall is on the way down while global passenger numbers – trains, planes and automobiles – is climbing rapidly, just look at the latest passenger stats from Ryanair PLC (LON:RYA), Easyjet PLC (LON:EZJ) and co.

WH Smith is planning on opening between 15 and 20 new ‘travel’ sites in the UK this year to take advantage of the rising number of travellers.

Expansion abroad

“The attraction of the travel business is the customer is usually in such a rush that convenience takes priority over price, or in the case of airports, there aren’t many alternatives where passengers can pick up a sandwich, magazine or book,” said Hargreaves Lansdown equity analyst George Salmon.

The investment in its travel division isn’t limited to the UK, WH Smith reckons there is considerable room for growth abroad. The firm is set to open 18 new stores abroad this year, including eight at Madrid airport.

Markets.com analyst Neil Wilson has praised management’s move to reduce the firm’s exposure to the ailing high street, calling it a “masterstroke”.

WH Smith shares were up 6.4% to £21.02 shortly before midday in London.

Quick facts: WH Smith PLC

Price: 1010 GBX

Market: LSE
Market Cap: £1.16 billion

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