Iconic British retailer WH Smith (SMWH) is on the cusp of a radical transformation from newsagent and stationer into a pure-play global travel retailer, having agreed to sell its iconic UK High Street business to Modella Capital for an enterprise value of £76 million.

Set to complete this summer, the deal for the profitable High Street chain, an important feature in the UK retail landscape for over two centuries, was priced below expectations, while net cash proceeds coming to WH Smith will be just £25 million once adjusted for transaction and separation costs.

One reason for the shortfall versus expectations may be that the sale does not include the WHSmith brand, which will remain exclusively associated with the Travel retail business. Also excluded is WH Smith’s online greeting card business, funkypigeon.com, which might go under the hammer at a later date.

Management argue the disposal frees up WH Smith’s management to focus on the cash-generative and faster-growing Travel business with stores in airports around the world and in UK hospitals, railway stations and motorway service areas. These benefit from a captive audience which allows the company to charge premium prices for its products.

Travel generated 75% of the group’s revenue and 85% of its trading profit in the year to August 2024 and by removing exposure to the UK High Street, WH Smith insists the sale will enhance its revenue growth and margins and accelerate growth in trading profits and earnings per share whilst maintaining its ‘attractive free cash flow generation’.

With more than 1,200 stores across 32 countries, the Travel arm will hope to benefit from a 2.5 times increase in air travel passenger numbers between 2024 and 2050, driven by both population and economic growth, and increasing global investment in airport infrastructure creating more opportunities for airport retailing.

WH Smith also argues the Travel business is in ‘a strong position to roll out its one-stop-shop strategy as landlords look to combine travel retail concepts’ and with its strong track record of making value-creating acquisitions in the travel retail space, will continue to ‘look at opportunities when they arise’.

As for the 480 High Street stores employing around 5,000 staff, they’ll transition to new ownership under Modella, the retail turnaround specialist renowned for recent investments in brands including Hobbycraft and The Original Factory Shop. The stores will operate under the WHSmith brand for a transitional period before rebranding as TGJones, a name choice which has attracted some scorn yet one Modella insists ‘carries the same sense of family’ as the WHSmith brand. 

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