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Retailer WHSmith is in talks to sell its UK high street shops more than two centuries after it opened its first store in London.
The FTSE 250 company, which has been focusing on its outlets in airports, hospitals and train stations in recent years, confirmed on Saturday that it was “exploring potential strategic options”, including an outright sale of about 500 UK shops, which have around 5,000 staff.
The high street stalwart that is known for its stationery and books is in talks with several potential buyers and a deal could be agreed in the coming months, according to a person familiar with the process.
However, WHSmith cautioned on Saturday “there can be no certainty that any agreement will be reached”.
Interested parties in the company’s high street shops include Alteri, a private equity investor which focuses on retail, and Hilco, a turnaround specialist, according to two people familiar with the process.
Jonathan Pritchard, an analyst at Peel Hunt, said it was a more likely that a private equity firm would be better placed to extract value from WHSmith’s shops, and they were unlikely to be bought by a competitor.
“There will always be mechanisms that private equity funds have that can perhaps squeeze a bit more juice out of the orange,” he added. “If they can get it on a low enough multiple and identify more cost savings, they could probably get their money back quite quickly.”
WHSmith recorded a 7 per cent increase in group revenue to £1.9bn in the year ending August 31, while profit before tax fell to £106mn, from £110mn in the previous 12 months.
Kate Calvert, an analyst at Investec, said WHSmith’s decision to explore a sale of its high street stores was “just another step” in the company’s evolution.
WHSmith’s travel business and the high street arm “have always been kept quite separate from an infrastructure perspective. It [the high street arm] still generates good cash, and that cash has been useful in terms of growing the travel business internationally”, she added.
Over the past decade WHSmith has become an international travel retailer through acquisitions such as a $400mn deal to buy Marshall Retail Group in the US in 2019.
The strategic review, which was first reported by Sky News, marks a watershed moment in the history of the UK high street, which has been struggling with a shift to online shopping and higher costs.
Some established chains such as Debenhams and Topshop have disappeared from the high street.
WHSmith was established in 1792 as a family-run newsagent, and opened its first travel retail store in London’s Euston station in 1848.
WHSmith’s travel business now has more than 1,200 stores across 32 countries, and it accounts for three-quarters of the group’s revenue and 85 per cent of its trading profit.
Calvert added: “The business is big enough elsewhere to take on the growth, and do you really need the cash flow [from the high street arm]? I think that’s the decision.”
Tony Shiret, an independent analyst, said current WHSmith management could buy out the high street arm and run it as a private company, but a person close to the company said such a move was not on the cards.
Hilco declined to comment. Alteri did not immediately respond to a request for comment.
