UK. WHSmith Group has posted a solid performance for the six months ending 28 February with its travel division delivering sales growth of +7%.
Trading profit in Travel, which includes airports, rail, hospitals and all international stores, reached £41 million (US$58.19 million), up +5% year-on-year. This included £4 million (US$5.67 million) from the company’s growing international business. Total revenue for the international business in the half was £59 million (US$83.7 million) up +18%.
Group revenue declined -1% and profit before tax also slid -1% to £82 million (US$116.4 million). High Street revenue dropped -5% while trading profit in this area declined -6% to £50 million (US$70.95 million).
“The Group has delivered another good first half performance,” said WHSmith Group Chief Executive Stephen Clarke. “In Travel, which is the largest part of the Group in both sales and profit, we continue to see strong sales growth, up +7%, driven by continued investment in our UK and international businesses and ongoing growth in passenger numbers.
“As a result, profit in Travel was up +5% in the period. We have also had a record period for tender wins internationally, with 26 new units won since the start of the year, including eight units in Madrid Airport and our first seven units in South America in Rio de Janeiro [with Duty Free Americas]. We are now present in 48 airports across 27 countries.”
As at 28 February 2018 the Travel business had 258 units open internationally, and 839 units overall.
The company added: “Whilst the increase in passenger numbers continues to be an important driver of growth, we are well placed to take advantage of the structural growth opportunities in our markets by: focusing in our existing stores on improved execution and customer service; investment in store layouts; space and category management; developing new formats and opening new space in the UK; and expanding profitably overseas.”
International business
“Our international business is growing rapidly,” said Clarke. “However, our share of the global news, books and convenience (NBC) travel market is still very small and we see good opportunities to grow our international business using our three economic models of directly-run, joint venture and franchise.
As mentioned, WHSmith has won 26 new units outside of the UK. “Both Madrid and Rio de Janeiro are premium airports and major hubs in their respective territories with significant passenger numbers. We expect the units in Madrid to open ahead of the summer peak and anticipate the units in Rio de Janeiro will open later this year. We also won units in Australia, India, Malaysia and a further unit in Alicante in addition to our existing successful units in that airport.
“Together with our units in Alicante and Tenerife, the new units in Madrid will further build our presence in the Spanish market. The new units in Rio de Janeiro will be our first units in South America and represent a good opportunity for us in this new territory.
“Of the 258 units open, 56% are franchised, 38% direct lease and the remainder are joint venture. We will continue to use these three economic models flexibly in order to create value and win new business.”
New format
In the UK travel space, WHSmith has opened its first UK store showcasing a new, large airport format in Gatwick Airport South Terminal in December 2017. See The Moodie Davitt Report’s on-location report on the new store here.
“We have continued to invest and focus on developing new formats that position us well for the future. Analysis shows that we can deliver superior average transaction value and sales per passenger from larger store footprints as a result of improved customer circulation which drives customer conversion,” said Clarke.
“Both the new store design and increase in sales per passenger are helping us to renew and extend existing contracts, secure new stores, and extend our footprint in existing stores. During the second half, we will open a new store in Gatwick North Terminal and convert our existing stores in Heathrow Terminal 3 and Terminal 4 to this format. We believe there will be further opportunities in UK airports going forward.”
High Street
“Our High Street business delivered a good first half performance, despite no publishing trend to match last year’s strong sales of humour books over Christmas. Stationery performed particularly well in the period, including our seasonal categories over Christmas and our 2018 fashion ranges.
“These results are only possible through the hard work of all of our teams across the business and I am very grateful for their hard work and support. While there is some uncertainty in the broader economic environment, we have made a good start to the second half of the financial year, increased the interim dividend by 10% and are confident in the outcome for the full year,” concluded Clarke.
