WH Smith to buy second US travel retailer; High Street book sales fall 5%

WH Smith has announced it is to buy US indie travel retailer Marshall Retail Group (MRG) for $400m. The acquisition follows its buy of US airport retailer InMotion last year.

MRG is described as "a fast growing independent travel retailer operating in high footfall airport and tourist locations in the United States, differentiated from its competitors by its strategy of developing highly customised retail". ​It has 160 stores in the US and Canada. The buy will be financed through a new £200m loan facility and a £155m fully underwritten equity placing.

The announcement came as WHS revealed group revenue up 11% - but just 1% like-for-like - to £1,397m for the 12 months to end August 2019. Group profit before tax was £135m (2018: £134m).

In its Travel division, revenue was up 22% (8% excluding InMotion) to £817m, with profit up 14% to £117m. Internationally, InMotion contributed operating profit of £8m and revenue of £94m, and WHS said it was "pleased with its performance which is ahead of our initial expectations." 

However in the High Street division, revenue was down 2% to £580m, with a trading profit flat year-on-year at £60m. WHS described it as a "good" performance "in line with our expectations." Books revenue in the High Street division continued to drop, down 5% like-for-like, although the margin increased compared to the prior year, WHS said. 

The retailer said it had identified additional £7m of cost savings in the High Street division, making a total of £17m over the next three years, of which £9m are planned for 2019/20. 

In a note on current trading, WHS said that after the first six weeks of its new financial year, total revenue for the Group was up 12% (1% like-for-like) with Travel total revenue up 25% (5% like-for-like) and High Street revenue down 4% (3% like-for-like).

Group chief executive Stephen Clarke, delivering his final set of results before leaving the company at the end of this month, said the Group had delivered "another strong performance" and the Board had proposed an 8% increase in the final dividend "reflecting the Group’s cash generation and our confidence in the future prospects of the Group".

He added: "While there is uncertainty in the broader economic and political environment, we are pleased with the start to the new financial year in both businesses."

Carl Cowling will take over as Group c.e.o. on Clarke's departure. Cowling joined in 2014 as m.d. for W H Smith Travel before joining the board and being made m.d. of the retailer's High Street arm.