WH Smith is expanding its successful division which operates stores in travel locations with the acquisition of US firm Marshall Retail in a deal worth $400m (£312m).
The purchase will broadly double the size of WH Smith’s international travel business and comes almost a year after the purchase of another US-based travel retailer, InMotion Entertainment, for $198m.
Marshall Retail Group (MRG) is a fast-growing travel retailer, operating 170 stores in North America, with 59 of these inside airports and others in resorts and tourist locations. The company is expected to deliver revenue of around $204m and EBITDA of about $31m for the financial year ending December 2019.
WH Smith stated that it expects to generate annual cost synergies of around $11m by the third full year following completion of the deal from procurement savings and operational efficiencies.
Carl Cowling, WH Smith’s incoming Chief Executive, commented: “MRG is a highly successful US travel retailer with a fast-growing airport business. This acquisition will accelerate the growth of our International Travel business and combined with InMotion, the market leading digital accessories airport retailer that we acquired last year, will significantly enhance our scale and growth opportunities in the US, a large and fast-growing travel retail market.”
News of the deal was announced alongside WH Smith’s annual results statement. The group’s total revenue for the year to 31 August rose 11% to £1.40bn with pre-tax profit edging up 1% to £135m.
Its Travel division continued to be the driving force behind the company’s growth with total revenue up 22% to £817m and like-for-likes increasing 3%. The unit’s trading profit rose 14% to £117m.
Meanwhile, the High Street division continued to struggle with total revenue slipping 2% to £580m and like-for-like sales also down 2%. Trading profit was flat at £60m, although the group stated that it had seen good gross margin performance and costs were “tightly controlled”.
WH Smith highlighted that it had made a good start to its new financial year with like-for-like sales up 5% in its Travel division over the first six weeks. However, High Street sales were down 3%.
“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. Looking ahead, the group will continue to focus on profitable growth, cash generation and delivering value for shareholders,” said Stephen Clarke, the group’s outgoing Chief Executive who will officially be replaced by Carl Cowling at the beginning of November.
NAM Implications:
- An obvious boost for its travel retail division…
- …and thereby opportunities for suppliers.
- But eventually the cost-synergies will need to grow…
- …so suppliers need to ensure they secure fair shares of investment and return…
