WH Smith sells excessive avenue enterprise to Hobbycraft proprietor for £76m

The iconic WH Smith brand will disappear from British high streets after the retailer agreed a £76million sale of the business to a London-based investment boutique.

The retailer has been in talks with potential buyers since late January as it opted to call time on ever-shrinking sales in the high street business, which has been eclipsed by booming trade in airports and train stations.

WH Smith told investors on Friday it would sell the unit to Hobbycraft owner Modella Capital, which is also reportedly considering a bid for Lakeland, on a cash and debt-free basis.

The group, whose brand is not included in the sale, said the deal would allow it to ‘concentrate on capturing the substantial growth opportunities in its key travel markets with a clear focus on driving shareholder value’.

Carl Cowling, group chief executive, said the sale was a ‘pivotal moment’ for the group and its ‘ambition to become the leading global travel retailer’.

Around 75 per cent of WH Smith’s revenues and 85 per cent of its trading profit now comes from its travel business, which has a footprint of over 1,200 stores across 32 countries.

WH Smith’s store in London’s Victoria train station reflects the direction of travel for WH Smith 

But the high street business remains profitable and cash generative, currently employing around 5,000 staff across roughly 480 stores in primary locations across the UK and from its Swindon based support centre.

Led by current high street boss Sean Toal, the new business does not include personalised online greeting card business funkypigeon.com – but WHSmith said on Friday it would also ‘explore strategic options’ for the unit, including a possible sale.

Analysts have previously warned a sale of the business, which will eventually rebrand as TGJones, could result in the closure of almost half of stores.

WH Smith said the sale would enhance revenue growth and profit margins, while helping the group to maintain ‘attractive’ cash flow generation.

It highlighted forecasts for growing volumes of air travel over the next 25 years, as well as investment in airport infrastructure, as strong structural growth trends.

WH Smith said its travel business, which generated sales of almost £1.5billion last year, would focus on increasing spend per passenger and numbers of passengers, optimising use of space, and growth in new and existing markets.

Cowling added: ‘With the ongoing strength in our UK Travel division, and the scale of the growth opportunities in both North America and the Rest of the World, we are in our strongest ever position to deliver enhanced growth as we move forward as a pure play travel retailer.

‘With a clear strategy, a strong balance sheet, and operations in high growth and attractive markets, we are well-positioned to generate substantial growth and value for all stakeholders.’