British retail faces a reckoning as WH Smith looks to sell its stores

British retailer WH Smith is looking to sell its historic high street business to focus on its travel store unit in the latest hit to the U.K.’s retail industry.

The 232-year-old retailer said Monday that it was exploring the sale of more than 520 high street stores, which sell newspapers, books and stationery, confirming reports over the weekend that talks were underway.

“WHSmith confirms that it is exploring potential strategic options for this profitable and cash generative part of the Group, including a possible sale,” the company said in a statement on the London Stock Exchange website.

“There can be no certainty that any agreement will be reached, and further updates will be provided as and when appropriate,” it added.

WH Smith — part of the FTSE 250 — has been doubling down on its U.K. travel unit over recent years, with over 580 travel stores across airports, hospitals, railway stations and motorway service areas. Its wider global travel business totals 1,200 stores across 32 countries, which the company said now accounts for three-quarters of its group revenue and 85% of its trading profit.

Investec’s Kate Calvert said in a note Monday that the plans were “not a surprise” given the group’s investment in its travel operations. In emailed comments to CNBC, Calvert added that WH Smith investors should be buoyed by the move.

“You own WH Smith for the Travel business. Travel is an attractive long term structural growth market. If you dispose of High Street, you should get a higher valuation rating over time,” Calvert, head of retail and consumer research at Investec, told CNBC via email.

Shares of WH Smith climbed around 5.5% following the announcement Monday, having fallen nearly 11% in 2024.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, agreed, noting that post-pandemic travel demand had been a tailwind for the company, while traditional stores in town and city centres have been “struggling.”

“Investors appear more confident in the direction of travel the company is taking, hopeful that a seller will be found to remove what’s been more of a burden than a diversified blessing. However, given the resonance of WH Smith with the UK public, it’s likely a buyer will be found for the brand and a chunk of stores, but its seems inevitable that the nationwide footprint will shrink,” Streeter added.

Restructuring firm Alteri is reported to be among a small group of potential bidders for the high street stores, according to the Guardian. Alteri did not immediately respond to CNBC’s request for comment.

The move comes as pressure mounts on the U.K. high street retail industry amid the continued growth of e-commerce.

Domestic policy changes have added to costs for U.K. business, with the government in October announcing increases to the U.K.’s minimum hourly wage and the National Insurance (NI) payroll tax paid by employers.

“Online shopping, the growth of social commerce, and the digitisation of some products has contributed to a lowering of demand for some physical retail stores,” Linda Ellett, head of consumer, retail and leisure for KPMG U.K., said.

“While stores will always be a key part of many retailers’ strategy — rent, rates, and employment costs all must be factored in. Firms are increasingly scrutinising where best to be located and the implications of the likes of recently announced employment cost rises,” she added.

High street supermarket chain Sainsbury’s announced on Thursday that it plans to cut 3,000 jobs in the U.K., while Morrisons on Friday said it was making several key shop floor roles redundant. It follows warnings earlier this month from major retailers who cautioned that they could be forced to cut thousands of jobs this year to cover the cost of higher taxes, according to a survey by the British Retail Consortium.

“The Retail sector has seen unprecedented opex [operational expenditure] inflation in recent years from National Minimum wage and rates increases,” Calvert said.

“Government increases in NMW & NI [national minimum wage and national insurance] are a huge headwind and very unhelpful. Retailers will need to close unprofitable stores,” she added.