UK-based books and convenience retailer WHSmith has earmarked the North American airport and resort market for store expansion, with an expectation of delivering a 12-month profit of $62 million (£50 million) by the close of the company’s financial year, ending August.
WHSmith-which owns the airport-based electronics retailer InMotion and Las Vegas-headquartered Marshall Retail Group-is keen to expand the existing North American estate. This includes 319 specialty retail stores, 222 located in airports (including 120 InMotion stores), and 97 stores in resorts.
WHSmith Group CEO Carl Cowling commented: “In North America, we continue to open stores (and) have grown our new store pipeline with significant tender wins. We have gained a further 28 stores so far this year, including 11 in Canada across Calgary and Edmonton airports.”
In the six months ending February 2023, 29 stores have been opened, and these are performing well, according to Cowling. He added: “In the current financial year, we expect this division to generate over £50 million in trading profit, making it our second largest division.”
On a much better footing
Though the pandemic caused great disruption to WHSmith’s business, including job losses, traffic is now on a much better footing. TSA travel data for the company’s fiscal first half showed passenger numbers were just 4% below 2019 levels, with international passengers recovering strongly.
First half revenue in North America was up by 53% (of which 20% was due to exchange rate flux) to $220 million (£177 million) with a trading profit of $17 million. This reflected the recovery in passenger numbers, better margins, and the foreign exchange benefit.
The second half (since March 1) has also started well with total sales in North America 33% ahead of 2019. A statement from the company said: “Our North America business has become an increasingly significant part of the group and the growth prospects are substantial.”
By the end of August, WHSmith’s Travel UK business will still be the leader in profit terms, but North America has better long-term opportunities. It is a more diversified market where the company has multiple brands and a high success rate of winning new tenders. With that should come greater market share against airport retail competitors like Dufry’s delisted Hudson GroupHUD 0.0% and Paradies Lagardère. WHSmith stated: “We have applied our forensic approach to retailing from the UK to the US market and are seeing good results.”
The US is a big travel retail market and analysis by WHSmith indicates that there were a total of approximately 2,000 news, gift and specialty retail stores in the top 70 airports. This gives the company’s North American business a market share of about 13% (based on store numbers, not sales, and including stores won and yet to open).
To grow more profitably, the UK retailer will be taking a closer look at optimizing space management, adding higher margin products such as health/beauty and tech gadgets, as well as adding operational efficiencies such as self-scan checkouts which have already started to appear.
Significant new openings for WHSmith have included Kansas City, Nashville, and Newark airports, as well as Oakland, Palm Springs, Washington Reagan, Las Vegas, and units at LaGuardia in 2021. The company has now opened seven of the 13 stores planned for Newark, as part of a 15-year contract.
By August (at the end of the current financial year), WHSmith expects that its travel retail business will represent over 70% of group revenue, and around 85% of group profit, a very different picture from 2019 when travel accounted for just 58.5% of sales.
Commenting on the travel retail overall, Cowling said: “Revenues are 19% ahead of 2019 levels despite passenger numbers being considerably below 2019. This performance has been driven by our category expansion, focus on average transaction value, the success of InMotion, and our travel essentials one-stop-shop format.”