Nestling in the small print of WH Smith‘s latest Preliminary Results Announcement is confirmation that the beleaguered British high street news and magazine vendor is set to close 25 high street stores, affecting nearly 200 jobs – and there may be more closures in future.
While some might argue WH Smith stores are something of a dinosaur compared with online services such as Newsstand and major supermarkets, they nevertehless remain a vital element in the sale of comic and magazines.
Despite a bullish outlook statement pointing to strong online growth, boosted by continued success for its funkypiegon.com and cultpens.com offerings, the coronavirus pandemic has pushed the retailer £280m into the red.
Smaller high street outlets will fall victim to resulting closures as the company continues to save on operating costs, after sales in WH Smiths high street business fell 19%.
As of 31st August 2020, the company’s High Street business operated from 568 WH Smith stores. Eight WH Smith stores were closed this year and there has already been a round of redundancies this year, back in August.
The company, which has been the focus of fierce criticism, ranking bottom in an annual Which? poll for its level of service last year, makes no qualms about the need to trim its finances in difficult times.
“Driving efficiencies remains a core part of our strategy and we continue to focus on all areas of cost in the business,” they say. “We achieved cost savings of £23m in the year. These savings come from right across the business, including rent savings at lease renewal (on average over 45%) which continue to be a significant proportion, government property rates holiday, marketing efficiencies and productivity gains from our distribution centres.
“An additional £34m of cost savings have been identified over the next three years of which £21m are planned for 2021.”
Much of those savings look to be in the form of closing shops as leases come up for renewal.
“Over the years, we have actively looked to put as much flexibility into our store leases as we can, and this leaves us well positioned in the current environment,” say WH Smith. “The average lease length in our High Street business, including where we are currently holding over at lease end is 2.5 years. We only renew a lease where we are confident of delivering economic value over the life of that lease. We have about 420 leases due for renewal over the next three years, including 120 where we are holding over and in negotiation with the landlord.
“Depending on the negotiations with our landlords and the government ’s future approach to property rates, we anticipate closing about 25 stores in the current financial year as the leases on these stores expire.
“While this is not an easy decision to make for our colleagues or the communities we serve, it is vital we retain a strong and cash generative high street portfolio going forward.”
The obvious inference is that the first 25 stores cited may not yet be the last, as WH Smiths adjusts to retail changes impacting a high street left reeling by COVID-19, that has accelerated the move to online shopping for many. (In contrast to other sales strands, WH Smith sales through the retailer’s main website soared by more than 240%).
In addition to high street woes for WH Smith, the group’s previously successful travel outlets, in stations, airports and hospitals, have been even worse hit. They recorded a 43 per cent slide in sales in the year to 31st August.
While WH Smith customer service continues to cofound many when stores are open, and the retailer perhaps unwisely chooses to squeeze its comics and magazine offering into ever smaller space in some stores, the retailer still provides a useful service for publishers, if in part only as a “shop window” on the sheer range of titles available. News of further closures makes for grim reading.
Carl Cowling, the chief executive of WH Smith, says the company has a “robust plan” focused on cost management and enough cash in place to survive even if there were a further two-month lockdown in the UK.
“We are a resilient and agile business,” The Guardian reports. “The actions we have taken have put us in a strong position to navigate this time of uncertainty and we are well positioned to benefit as our markets return to growth.”
• WH Smith: Preliminary Results Announcement and Financial Accounts for the 12 Months to 31 August 2020
• BBC News: Covid: WH Smith slumps to a loss as pandemic hits sales
• The Guardian: WH Smith to shut 25 high street stores after it reports £280m loss
• Essential Retail: WHSmith records large pre-tax loss amid Covid-19 crisis
• downthetubes: Why WHSmith redundancies and further store closures are bad news for British comics
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