WH Smith (LSE: SMWH) has signed off from the British high street – and for less money than it hoped.
The retail chain has completed the sale of its high street business to Modella Capital, but at a cut-price £40 million, well short of the £52 million once expected. Investors took the hint, sending shares down over 5% in early trading.
If the deal smells like a fire sale, that’s because it is. A “softer trading environment” and a more “cautious outlook” gave Modella the upper hand late in the game. WH Smith, meanwhile, gets just £10 million in cash this financial year, with the rest tied to performance-based hopes and deferred tax assets – hardly a ringing endorsement of the buyer’s confidence.
This is less about short-term accounting and more about long-term reinvention. WH Smith has been trying to shed the dead weight of its high street legacy for years. The sale, however imperfect, clears the decks for its true profit engine: travel retail. Airports, stations, and international growth now carry the torch.
If the UK high street, once the core of WH Smith’s identity, is now worth so little and seen as such a liability, what does that say about the wider state of bricks-and-mortar retail in Britain? The sale price might say more about the buyer’s caution than the seller’s desperation.
Yet WH Smith claims business in its travel division remains on track. Perhaps. But expectations are a moving target, and with net debt rising to £425 million, there’s little room for error. Strip away the nostalgia^, and this deal is one thing above all else, a bet that the high street, for WH Smith at least, is truly a thing of the past.
WH Smith shares took a hit on the news, initially dropping 7.8% in early trading before settling at around 4% lower by 9:30 GMT.