WH Smith plans $400m US acquisition

The retailer has completed a £155m placing to help cover the costs of the deal. If completed, it will roughly double the size of the group’s international travel business. Marshall has 170 stores in North America, of which 59 are in airports and contribute around $84m in sales. Part of the appeal is the speed at which it is growing its airports business, with 33 stores expected to open between now and December 2024, adding just shy of 80 per cent to its existing 54,000 square feet of airport selling space.

The deal forms part of a strategy to expand this area of the business. Last year, the group entered the US market through the $198m acquisition of InMotion, another travel retailer. Acquisitions aside, we're witnessing organic growth in this segment despite wider industry challenges. Sales were up 3 per cent on a like-for-like basis, while profits grew 14 per cent to £117m. International store units numbers rose more than 50 per cent to 433 in the year, including the group’s first WH Smith store in a major US airport.

As ever, the high-street division was something of an also-ran, with trading profits flat at £60m and like-for-like sales down 2 per cent. The group has performed admirably in stripping out costs, cutting out £9m in the year to August with a further £7m expected in the coming 12 months. 

Stationery is a crucial product category for the high-street operation, and management is focusing its efforts on expanding its product offering and growing market share. It launched a new book and stationery website in the second half and acquired stationery group The Card Gallery, which owns online wedding stationery brands Treeofhearts.co.uk and Dottyaboutpaper.co.uk.

Broker Peel Hunt increased its adjusted pre-tax profit forecast for August 2020 by 4 per cent to £175m following the announcement, while trimming EPS by 0.2p to 128.6p. This compares with £155m and 116.3p in FY2019.