In a significant shift for British retail, WH Smith has agreed to sell its UK high street business to private equity firm Modella Capital for £76 million, marking the end of an era for the iconic brand. Founded in 1792, WH Smith has been a staple of British town centres for over two centuries, but the sale will see its familiar name replaced by the new brand TGJones.
The deal encompasses approximately 480 high street stores, which employ around 5,000 staff. However, it excludes WH Smith's lucrative travel retail business, which operates more than 1,200 stores across 32 countries, including locations in airports, train stations, and hospitals. This travel division has become the primary focus for WH Smith, contributing 75% of the group’s revenue and 85% of its trading profit in the last financial year.
Group CEO Carl Cowling described the divestment as “a pivotal moment” for WH Smith, allowing the company to concentrate on its strategic ambition to become a leading global travel retailer. “High street is a good business; it is profitable and cash generative with an experienced and high-performing management team,” Cowling stated. “However, given our rapid international growth, now is the right time for a new owner to take the high street business forward.”
Modella Capital, which also owns the arts and crafts retailer Hobbycraft, plans to maintain the current product offerings, including Post Office outlets and Toys “R” Us concessions, while introducing new ranges to the stores. A spokesperson for Modella remarked, “TGJones feels like a worthy successor to the WH Smith brand. Jones carries the same sense of family and reflects these stores being at the heart of everyone’s high street.”
The sale follows a competitive bidding process that began last year, with interest from other private equity firms such as Hilco and Alteri. Despite the £76 million enterprise value being below initial expectations, analysts suggest that the deal will allow WH Smith to enhance its margins and accelerate growth in its travel division, which has been thriving in recent years.
As WH Smith transitions to a pure-play travel retailer, the high street stores will operate under the WH Smith brand for a short transitional period before rebranding to TGJones. This rebranding has raised concerns among analysts about the potential for reduced foot traffic, as the WH Smith name has historically drawn customers to its stores. Russ Mould, investment director at AJ Bell, noted, “The WH Smith brand was the key reason why its stores managed to stay alive in a crumbling high street environment. Take the brand away and there is a major risk that footfall to these stores plummets under the TGJones name.”
Despite these concerns, Modella Capital expressed confidence in the future of the high street. The firm has previously made successful acquisitions in the retail sector and aims to leverage its experience to revitalize the TGJones brand. “We are delighted to have been the successful bidder for one of the UK’s most iconic retail businesses,” said a Modella spokesperson. “Today, over one million customers visit these stores every week.”
WH Smith's decision to focus on its travel operations comes in response to changing consumer habits and increased competition from online retailers and budget high street shops. The high street division, once a significant contributor to the company’s profits, now represents just 15% of the overall profit, prompting the need for a strategic refocus.
Historically, WH Smith has been known for its diverse range of products, from newspapers and magazines to stationery and books. However, in recent years, it has struggled to maintain its foothold on the high street amid rising competition and changing consumer preferences. The company’s reputation has been challenged, with social media accounts like WHS_Carpet highlighting the dilapidated state of some stores.
As WH Smith embarks on this new chapter, the impact of the sale on communities served by the high street stores remains to be seen. The Communication Workers Union has previously raised concerns that the sale could lead to “postal deserts” in some areas, as around 200 post offices operate within WH Smith locations. Modella has assured that it intends to keep all existing services, including the Post Office and Toys “R” Us concessions.
Industry experts predict that while some stores may close, Modella’s acquisition could also present new opportunities for growth, particularly in appealing to younger shoppers interested in crafting and creative activities. Catherine Shuttleworth from the retail consultancy Savvy emphasized the potential for Modella to maximize opportunities with younger consumers seeking crafting inspiration.
In the face of diminishing high street presence, WH Smith’s legacy as a community hub for readers and shoppers is at a crossroads. The Booksellers Association expressed sadness over the loss of the WH Smith brand from the high street, highlighting its role in promoting reading and providing access to books in communities with limited resources.
As WH Smith transitions to a travel-focused retailer, the future of the TGJones brand will depend on its ability to resonate with consumers and adapt to the evolving retail landscape. With passenger numbers in air travel expected to grow significantly in the coming years, the travel division's prospects appear bright, positioning WH Smith for continued success in the global market.
Ultimately, the sale marks a significant turning point for WH Smith, a brand that has been synonymous with British retail for over two centuries. As it shifts its focus to travel, the legacy of WH Smith will continue to live on in its travel outlets, while the high street stores enter a new chapter under the TGJones name.
