WHSmith’s trading updates have become somewhat infamous in retail over the past few years for their sheer predictability.
Travel sales up. High street sales down. Solid cost control. Stable margins. Profit growth.
It is a recipe that may not be to everyone’s taste, but one that has led to success for both the business and its shareholders.
Today provided more evidence of that, with a step change that had been long in the offing: sales from its travel-arm outstripped those made on the high street for the first time in WHSmith’s 225-year history.
Its boss Stephen Clarke admits the sales lines between its high street and travel arms will “continue to diverge” as the latter division presses ahead with its expansion plan.
“You wouldn’t have had to be a mathematical wizard to see that the lines were going to cross at some point,” Clarke tells Retail Week.
“In terms of sales, they will continue to diverge because of the high growth levels we will see in travel.
“The strategy in high street is not about driving top line sales, it’s about driving sustainable profit”
“The strategy in high street is not about driving top line sales, it’s about driving sustainable profit.
“In travel, we do have lots of growth potential, both on a like-for-like basis in the UK, and on a new space basis both in the UK and overseas.”
WHSmith now boasts 273 international stores across 45 airports and 25 countries.
The 2016/17 financial year was its best yet for opening new stores internationally. It secured 40 units including shops at airports in Singapore, Rome, Düsseldorf, Malta and Malaysia.
The future of high street
But with Clarke insisting “there is loads more to go for” both in the UK and overseas as the travel growth vehicle continues to accelerate, will that leave its high street arm stalling?
Clarke insists not.
Although high street sales dropped 5% on a total basis and 4% in like-for-like terms during the year to August 31, trading profit from the division remained flat at £62m.
“This time last year, we had record profit growth and record profit in the high street off the back of adult colouring. We had really good sales in both books and stationery because of that and delivered record performance,” Clarke explains.
“Clarke says early results of the low cost and new format shops have been “good” and hopes to roll them out to more locations if trading holds up through the crucial Christmas period”
“We’ve equalled that this year which, given the current environment and all the inflationary pressures from the [national] living wage, the apprenticeship levy and so on, is a really strong performance from high street.”
But Clarke admits the high street environment remains “challenging” and is taking measures to ensure WHSmith continues to hold its own amid the unforgiving trading landscape.
Back in July, he restructured the retailer’s management team to sharpen its strategic focus, promoting Carl Cowling from managing director of its travel division to take up the same position at the helm of its high street business.
Many saw the move as an indication that WHSmith was ready to transplant some of its successful travel approaches to the high street.
The retailer is trialling introducing coffee shops into stores in “smaller, regional” train stations, standalone bookshops in airports and a larger footprint store at Gatwick South Terminal that will allow for “better category segmentation and customer flow through the stores”.
Yet WHSmith is experimenting with its high street portfolio in other ways.
It is dedicating more space to its popular stationery offer – which posted like-for-like growth of 3% across the group during the year – and in-store Post Offices, 58 of which launched during the 12-month period.
It is testing “lower cost” stores on high streets in Kingston, Richmond and Bath to gauge whether it can maintain similar earnings from a slimmer bricks-and-mortar investment.
And the business has taken what Clarke describes as a “major step forward” in store design with pilots in Reading and Holborn – both of which are a far cry from the images regularly posted on the @WHS_Carpet parody Twitter account.
Watch more: WHSmith’s new format in Reading
Clarke says early results of the low cost and new format shops have been “good” and hopes to roll them out to more locations if trading holds up through the crucial Christmas period.
Far from resting on his laurels, Clarke admits “there is still lots more to do” within its high street arm.
WHSmith’s travel may have taken off, but its high street stores are certainly not grounded just yet.