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WH Smith to shut six shops in revamp as high street business slips

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By Reuters
WH Smith to shut six shops in revamp as high street business slips
A company logo is pictured outside a branch of WH Smith in Manchester northern England, March 17, 2016. REUTERS/Phil Noble   -   Copyright  Phil Noble(Reuters)

By Noor Zainab Hussain

(Reuters) – Shares in WH Smith <SMWH.L> fell more than 8 percent on Thursday after the books, newspaper and stationery retailer said it would close six high street stores and a franchisee initiative as part of a restructuring to cope with weaker consumer spending.

The company said group pretax profit fell 4 percent to 134 million pounds in the year ending in August and high street trading profit fell 3 percent to 60 million pounds.

Hargreaves Lansdown equity analyst George Salmon said WH Smith was still delivering underlying profit growth “but that performance masks the fact WH Smith’s high street division is facing some pretty tough challenges.”

WH Smith’s shares were 8.5 percent lower at 1,859 pence by 0745 GMT, one of the worst performers on London’s midcap index <.FTMC>.

WH Smith, which operates 867 travel outlets and 607 high street stores in Britain, said it would wind down its franchised convenience store arm WHSmith Local and its Cardmarket chain, as well as closing about six high street stores and restructure some other operations.

“We are not ignoring the broader challenges on the UK high street and during the second half, we conducted a business review to ensure our high street business is fit for purpose now and for the future,” Chief Executive Officer Stephen Clarke said.

Total revenue from the high street business was down 3 percent with comparable sales also falling 3 percent. But travel trading profit rose 7 percent in the year to 103 million pounds.

RBC analyst Richard Chamberlain said WH Smith’s shares would receive a boost if the firm split its travel and high street businesses.

Begbies Traynor partner Julie Palmer said the firm could “weight its efforts towards its travel arm, creating more commuter and traveller friendly products and buying up space in locations that fit a similar criteria.”

“WH Smith is a fine example of how going online isn’t the only solution for traditional retailers as its travel arm enjoys growth while focus shifts from its high street,” Palmer said.

(Reporting by Noor Zainab Hussain in Bengaluru; Editing by Bernard Orr and Edmund Blair)