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WH Smith succeeds on the high street and online through a focus on stationery – and cutting store rents

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WH Smiths' Kings Cross store
WH Smiths' Kings Cross store
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WH Smith succeeds on the high street and online through a focus on stationery – and cutting store rents

WHSmith today showed how it is making a high street presence work for it, despite ongoing declines in footfall.

 

The stationery-to-books multichannel retailer turned in profits of £60m (+0.0%) from its high street division, on turnover of £580m (-2%). The high street division, which also includes its ecommerce business, makes up 41.5% of WHSmith’s group sales of £1.4bn and includes 576 stores. Stationery sales account for half of its high street sales and for 60% of store contribution to profits. The figures come despite an ongoing decline in footfall that, the BRC and Springboard said this week, has meant visitor numbers to stores have fallen by 10% in the last seven years.

 

The retailer, ranked Top150 in IRUK Top500 research, also sells stationery online both through the WH Smith website, through its online personalised greetings card business funkypigeon.com and through cultpens.com. In the second half of the year it added The Card Gallery, including treeofhearts.co.uk and dottyaboutpaper.co.uk. “Although small, these online stationery businesses align with our digital strategy of broadening our stationery ranges and enhancing our customer offer.”

 

Group chief executive Stephen Clarke, delivering his last set of results in the role, said: “In our high street business we have delivered another good performance. We continue to focus on improving our stationery offer and this remains our key area of investment. As a result, we delivered a strong ‘back to school’ period with good growth across many product categories.”

 

In addition, the retailer focuses on space and margin management, as well as third-party partnerships - such as that with the Post Office - that create extra value. So far there are 205 Post Offices within branches of WH Smith. Its retail space, it said, was a “strategic asset and we utilise our space to maximise profitability.” It also saved £9m in costs during the year and pans to save £17m over the next three years.

 

Patrick O’Brien, UK retail research director at GlobalData, said: “The retailer has not fallen into the trap of onerous long leases, with average lease length under four years and it boasts that it has negotiated average rent reductions of 35% on lease renewals (which is even better than Next’s 29%) and pays nothing at all in rent on some of its stores, showing that having a WH Smith in your town is still considered important for the health of the retail around it.

 

“It puts its high street success down to its ‘forensic’ store by store focus on space management and category mix management, which it has long given the impression is some sort of alchemy it alone can conjure, and yet it amounts to not a lot more than common sense retailing in a declining market.”

 

Meanwhile its travel business continues to grow, with sales of £817m up by 22% on last time. WH Smith today announced the $400m acquisition of Marshall Retail Group, a US retailer that has stores in airports and tourist locations, a year on from buying airport-based digital accessories business InMotion.

 

Across the group, WH Smith reported pre-tax profits of £135m in the year to August 31, up by 1% on the previous year, on sales 11% ahead at £1.4bn.

 

Commenting on the figures, Angus Burrell, head of omnichannel solutions at Valitor, said the retailer’s focus on travel outlets - in locations from service stations to train stations and airports in the UK and abroad - had helped drive business growth.

 

“However,” he added, “while WHSmith’s results are showing signs of promise, the retailer cannot neglect its high street and online stores. As well as ensuring that the right products are offered, WHSmith also needs to provide an excellent customer experience to everyone that shops with them – regardless of the channel. By gathering things like payment data from across its channels, WHSmiths can offer customers the products that they need even before they realise they need them. Overall though, it will be interesting to see how WHSmith adapts over the next decade in order to maintain this success."

 

Image: InternetRetailing Media/Paul Skeldon

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