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In Britain, the surnames Smith and Jones are equally common. Yet WHSmith’s switch from one to the other is anything but. The sale of its UK stores and their rebranding as TG Jones is a real break from history. Few UK retailers can boast a longer presence — perhaps only Fortnum & Mason, whose 1707 founding predated WHSmith’s by some 85 years.
Retail specialist investor Modella, owner of the HobbyCraft chain, is buying WHSmith’s 480 high street stores, without the brand, at an enterprise value of £76mn. It says naming the chain Jones will carry the same sense of family and it will keep the same products — books, stationery, newspapers, cards and the like — while working on a new strategy.
A perked-up shopping experience, compared with the often drab WHSmith stores of today, could go a long way towards helping the new name stick with customers. UK sales growth has long been weak and it is really decades since the stores were a destination, particularly in provincial towns, for those book and magazine lovers who think of it fondly. Its management has kept the business in the black, with tight costs and partnerships such as that with the Post Office.
WHSmith will net about half the £52mn in gross profit from the sale after accounting for the costs of separating overheads and systems. Success in this case is less about how much the retailer wrung from the deal and more about whether investors will upgrade the shares now that the group’s faster-growing business in airports and train stations is no longer held back by the high street.
Trouble is, this too has hit an air pocket. WHSmith’s shares have slipped since news of a potential sale first broke two months ago because of slowing growth at home and overseas, which has hit both retailers and travel-focused businesses. Indeed, at 11 times forecast earnings, the group now trades at a discount of less than 10 per cent to closest peer SSP, which runs airport restaurants.
WHSmith is also very exposed to the US market after its purchases in 2018 and 2019 of two US airport retailers. The added turbulence caused by the Trump administration’s unpredictable policymaking gives investors another reason to hold off.
Its strange for Britons to think the name WHSmith is to vanish from their high street. Still, if anyone knows the need to continuously adapt, it should be a business that’s survived more than two centuries of upheaval in travel and bookselling.
