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The high street is dying and Covid ruined travel – but we’re still upbeat about WH Smith

While WH Smith expects to open further travel stores across Britain in the coming years, its international growth plans are likely to have a far more dramatic impact on its bottom line. Currently, international locations account for 50pc of its 1,162 travel stores.

However, it has only a 13pc market share of the lucrative US airport retail market. It plans to increase this figure significantly and has ambitious expansion plans in other territories where it already has a presence. It has a pipeline of more than 125 new travel stores. They could both improve its financial performance and broaden its geographical footprint to reduce its reliance on Britain.

Of course, WH Smith’s high street business offers a far less compelling growth opportunity than its travel segment. A long‑standing decline in footfall in Britain’s high streets limits its expansion potential.

That said, the performance of its high street shops has been relatively resilient in recent months. Their sales in the first half of the current year were flat and trading profits were slightly higher than in the same period last year, while the company’s plan to reduce costs through lease renegotiations should boost profitability. Rent savings at lease renewal have averaged 50pc this year and are expected to contribute to savings of £41m for the full year.

Cost reduction should help the company to overcome a period of high inflation. Its travel division’s locations also have near-monopoly status, which gives them significant pricing power. This will become increasingly useful if, as the Bank of England now expects, inflation reaches 10pc later this year.

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