WH Smith has revealed that sales from its shops in train stations and airports have overtaken high street stores for the first time as it posted a 7% hike in annual profits.
The retailer said its burgeoning travel arm is now the largest part of the group by both sales and profit, notching up a 10% surge in annual earnings to £96 million and accounting for nearly two-thirds of group trading profits.
This helped offset ongoing pressure on the high street chain, which saw trading profits remain flat at £62 million and like-for-like sales fall 4% in the year to August 31, despite a boost from spoof humour books such as Bruno Vincent’s Enid Blyton for grown-ups title, Five On Brexit Island.
Chief executive Stephen Clarke hailed a “good performance” across the group as overall pre-tax profits rose to £140 million from £131 million.
He said: “The travel business continues to perform well with strong revenue growth, up 9% in the year.
“For the first time, revenue in travel has overtaken high street, and travel is now the largest part of the group in both revenue and profit.”
He added the “economic environment remains uncertain”, but said WH Smith is well-placed for the year ahead.
Shares fell 2% despite WH Smith announcing a 10% rise in its final shareholder dividend payout to 48.2p.
WH Smith has 582 travel stores across the UK, as well as a growing overseas footprint, with 233 international shops.
It said the overseas stores contributed £9 million of the £96 million reported for the travel business.
The high street arm continued to benefit from tight cost control to help offset flagging sales, although WH Smith cheered spoof humour books as a “key driver” of revenues, which helped counter a sharp drop in sales of so-called colour therapy titles.
WH Smith has 611 high street stores, having closed three over the financial year.
It plans to continue focusing on growth in its fast-growing travel business, with 15 UK units opened in the past financial year.
Mr Clarke told the Press Association the group remained committed to its high street store chain and said there were no plans to scale it back or change strategy despite a “milestone” set of results for the travel arm.
He said the group had never been “overly obsessed with sales” at the high street division, instead focusing on keeping a lid on costs, growing margins and making best use of space.
“It’s a very different strategy in the high street business compared with travel – just because travel has overtaken it, that doesn’t signal a change in strategy for the high street.”
He added the high street stores had managed to match record profits from the year earlier, when the adult colouring craze was in full swing.
But the division has been under pressure for years amid online competition and declining numbers of shoppers on the traditional high streets.
This has come as the travel chain has grown consistently – boosted most recently by surging numbers of foreign travellers looking to take advantage of the weak pound, as well as rising numbers of UK passengers.
The group tapped into the rise in overseas traveller numbers by dedicating more space to souvenirs, while it also benefited from a food-to-go range.
Mr Clarke said the group aimed to open another 15 travel stores in the UK over the new financial year, while also launching more of the 41 international stores it recently secured in airports overseas.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said WH Smith was “the high street stationer no longer”.
He said: “With travel becoming the major contributor to group performance, these results mark an important milestone for WH Smith. The trend is only likely to continue.”