Why WHSmith thrived while Wilko failed
The business news that matters
Hello and welcome to the latest Off to Lunch…
I want to look at WHSmith today because amid the attention on the collapse of Wilko and the pressure on high-street retailers this is a business that has thrived by pivoting its strategy as sales fell.
PWC, the administrator for Wilko, has today announced the location of 52 shops that will close this week, with more than 1,000 jobs lost. You can find the list of shops below…
The following stores will close on Tuesday 12 September: Acton, Aldershot, Barking, Bishop Auckland, Bletchley FF, Brownhills, Camberley, Cardiff Bay Retail Park, Falmouth, Harpurhey, Irvine, Liverpool Edge Lane, Llandudno, Lowestoft, Morley, Nelson, Port Talbot, Putney, Stafford, Tunbridge Wells, Wakefield, Weston-super-Mare, Westwood Cross, Winsford.
The following stores will close on Thursday 14 September: Ashford, Avonmeads, Banbury, Barrow in Furness, Basildon, Belle Vale, Burnley (Relocation), Clydebank, Cortonwood, Dagenham, Dewsbury, Eccles, Folkestone, Great Yarmouth, Hammersmith, Huddersfield, Morriston, New Malden, North Shields, Queen Street Cardiff, Rhyl, Southampton-West Quay, St Austell, Stockport, Truro, Uttoxeter, Walsall, Woking.
The full statement from PWC is here
Meanwhile, WHSmith has published a trading update. This shows that revenue for its high street shops is down 1 per cent year-on-year but that revenue from its shops at airports, train stations and other transport hubs is up 42 per cent as it benefitted from the post-Covid recovery in travel. Group revenue rose 28 per cent in the year to August 31.
WHSmith was founded in 1792 and is the kind of business that you would not invent today. Its high street shops sell an eclectic mix of stationery, magazines, snacks, books, toys and technology. Yet it has succeeded by carefully managing costs and pivoting its focus to opening shops in travel hubs.
A decade ago WHSmith reported annual revenue of £1.2 billion, with £726 million (61 per cent) coming from its high street stores and £460 million (39 per cent) from travel. The business has evolved dramatically since then. Its annual results last year showed revenue of £1.4 billion with just £473 million (34 per cent) coming from the high street and £927 million (66 per cent) from travel.
That big shift in revenue has followed a big shift in where WHSmith has shops. In those results a decade ago, WHSmith said it has 615 high street shops and 673 travel shops. The latest figures from the company show it now has 523 high street shops and 1,226 travel shops around the world.
The number of travel shops is growing fast. WHSmith said today that it plans to open at least another 80 around the world over the next year, including more than 40 in North America.
You can find WHSmith’s latest trading update here. Shares in the company are actually down 7 per cent today because investors were hoping for more growth from the travel business. This is how the company’s share price graph now looks over the last 15 years…
WHSmith’s share price is yet to hit the heights it did pre-Covid, but this is a business that was founded in 1792 and has been able to find a place for itself in the modern world, unlike many other retailers…
Other stories that matter…
1. The law firm Schillings is launching a PR firm to help manage the reputation of its clients. It has hired George Pascoe-Watson, previously political editor at The Sun, and Victoria O’Byrne, the former communications director for Virgin Group and the Prince and Princess of Wales, to lead it. Story here
2. A fascinating in-depth piece from the Financial Times about how governments and the private sector are working together to try to make a breakthrough in fusion energy. There has been a “paradigm shift” according to the founder of one fusion energy company quoted in the feature. Piece here
3. The Wall Street Journal has looked at how Spotify’s $1 billion (£797 million) investment in podcasts went wrong and why the industry in general is struggling to make profits. Sticking with media, I enjoyed reading how Puck, the new US media group, is focusing its business model on a mix of subscriptions and advertising. You can find the article and podcast on this here. Also, Universal Music has struck a deal with streaming service Deezer that means professional musicians will get more money every time one of their songs is played. You can find the Financial Times story on this here and Universal’s statement here
4. The challenges of Brexit have encouraged the UK to become a more pragmatic country again, rather than one driven by ideology. That is according to Janan Ganesh in his latest column in the Financial Times, which you can find here
5. Optimism is one of the five key traits that successful entrepreneurs have in common, according to leadership author Simon Sinek. Piece by Founders Forum here
Podcast…
A reminder that the latest episode of our Business Studies podcast looks at the collapse of Wilko and why businesses fail. The retail veteran Ian Shepherd discusses what it was like being chief executive of video game retailer Game when it collapsed into administration and what retailers need to do today to not just survive but thrive. You can listen to the episode on Substack here, Apple here and Spotify here.
Business Studies is now taking a short summer break but I will be filling that gap with some thoughts on our recent episodes. Stay tuned…
And finally…
Yesterday we looked at some of the high-profile business books and movies coming this autumn. Adam Grant, the psychologist and management professor at Wharton in the US, has actually pulled together a list of 12 books coming later this year that will “enrich your thinking”. They include Michael Lewis on Sam Bankman-Fried and Walter Isaacson on Elon Musk, but also Optimal Illusion by Coco Krumme, which is about why aiming for the best is a mistake, The Right Kind of Wrong by Amy Edmondson, which is about learning from mistakes, and The Geek Way by Andy McAfee, which looks at how the tech giants in Silicon Valley have tried to manage their employees. You can find the full list here
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Best
Graham