S Poddar
WH Smith, the traditional high street retailer, has signed a deal to sell its 480 stores to Hobbycraft owner Modella Capital for £76 million. Under the deal, the famous WH Smith brand will be out of the town centres once the stores are rebranded TGJones during a temporary transition period. This change is a landmark for the 233-year-old company, but it will be maintaining its identity only in travel destinations like airports, train stations, and hospitals.
The acquisition will affect around 5,000 staff, with the handover scheduled to be over in June. While WH Smith will remain open almost 1,300 travel shops and its web site, the web site will no longer handle direct sales and will instead be an informational portal. Modella Capital has purchased WH Smith’s online trading business, which will be folded into the TGJones brand. However, the deal does not include Funky Pigeon, the retailer’s digital greeting card service, which WH Smith is currently evaluating for potential sale or other strategic options.
Concerns have arisen regarding the fate of WH Smith’s high street locations, with industry experts previously suggesting that up to half of the 480 stores could face closure. This has sparked fears of widespread job losses within the retail sector. Nicholas Found from Retail Economics referred to growing pressures on high-street retailers, naming footfall decline, increases in business rates, and pay inflation as primary issues. He stressed that several old brands are finding it difficult to keep up with the increasingly digital-first consumer world.
The deal puts the value of WH Smith’s high street business at £76 million on a debt-free basis. The retailer hopes to raise £52 million in cash from the transaction, although costs of transactions and separation will cut the eventual figure to £25 million.
Carl Cowling, group chief executive of WH Smith, said the deal was a turning point, cementing WH Smith’s commitment to the travel market. He admitted that although the high street division was profitable, the company’s rapid expansion overseas meant that a new owner was needed to drive the business forward.
Modella, which acquired Hobbycraft and owns The Original Factory Shop, has a track record of investing in retail brands. It was also formerly associated with Ted Baker’s UK licensee. The company has opted for the name TGJones for the rebranded outlets, hoping to preserve the familiarity and heritage that comes with WH Smith. A staff letter outlined that “Jones,” a recognized surname in the UK, was chosen to give an impression of family and continuity, consistent with WH Smith’s long-established reputation. The company’s iconic blue-and-white color brand will also be preserved.
Modella runs about 800 stores under different brands such as Create & Craft and Crafter’s Companion. The company ensured that workers are told operations would not be disrupted while new strategies and products are formulated. WH Smith said that common services like IT infrastructure will be completed within a year under a formal deal.
The sale has been welcomed by postal services campaigners, who fear that with WH Smith operating 200 post offices in stores already, postal services in some areas could cease. The Communications Workers Union (CWU) previously warned of such a sale removing postal services from some areas. CWU assistant secretary Andy Furey was skeptical about the commitment to the high street from WH Smith and demanded assurance that staff rights and conditions will be safeguarded in the change of ownership.
Modella said it aims to preserve current services, such as the Post Office and Toys R Us concessions, and pursue opportunities to add new product ranges. The emphasis on craft-associated products by the company implies that new products within this category could be considered as a priority to drive customers to the business.
Sean Toal, the head of WH Smith’s high street division, will move to Modella to manage the business. Confident in the transaction, Toal pointed out Modella’s backing of the business and potential for future growth.
WH Smith originally placed its high street business for sale in January, with Alteri Investors’ Bensons for Beds business and Modella being the final bidders. Travel retail delivered 75% of group revenues and 85% of trading profits in the company’s final financial year, highlighting the strategy to focus on this sector.
This sale marks the latest in a chain of high street upheavals following the demise of names such as Debenhams, Topshop, Woolworths, and Littlewoods from changing consumer habits and market forces. Although some of these stores have survived as online brands, full rebranded takeovers of established stores still remain fairly uncommon. Examples from the past include River Island’s conversion from Chelsea Girl in 1991 and Morrisons’ renaming of Safeway stores in the early 2000s. Not all such attempts have, however, succeeded, as is the case with Virgin Megastores, which was renamed to Zavvi in 2007 before the chain eventually closed down.
As WH Smith starts this major change, the retail scene remains on the move, influenced by wider shifts in the way that people shop and the continuing plight of the high street trader.
