WH Smith has a history of innovation and creativity. We were the first to locate shops at points where people gathered to travel. We were also the creator of the "yellow back" book, known today as the paperback. Today we are the UK market leader of books, magazines and, most recently, DVD software.
My vision for WH Smith is to continuously inspire our customers by embracing the fantastic legacy of the WH Smith brand and our tremendous opportunities for the future.
At the heart of the vision lies the WH Smith brand. With its associations of trust and accessibility, it has enormous untapped power and potential.—Richard Handover, Group Chief Executive
WH Smith PLC is one of Britain's oldest and best known retailing companies. The company's activities in book, newspaper, and stationery distribution and retailing over more than two centuries have made it a familiar part of daily commercial activity for British consumers. WH Smith is the United Kingdom's largest retailer of books and magazines through its chain of more than 530 WHSmith high street (main street) stores. These outlets also sell a wide range of other products, including stationery, maps, videos, CDs, DVDs, and electronic products. In addition to its main street stores, the group also runs more than 700 additional stores and newsstands in train stations and airports in Europe, the United States, Hong Kong, Singapore, and Australia. WH Smith is also involved in online retailing through its WHSmith.co.uk web site and in trade and electronic publishing through its ownership of Hodder Headline and Helicon, both of which were acquired in 1999. The group's U.K. market-leading newspaper and magazine distribution arm, WHSmith News, was put up for sale in early 2001.
First 100 Years: From Small "Newswalk" to Chain of Railway Bookstalls
WH Smith had its origins in a small "newswalk," or newspaper agency, in Little Grosvenor Street, London, opened by Henry Walton Smith and his wife, Anna, in 1792. Smith died only a few months later, and Anna ran the business by herself until her death in 1816, when her two sons, Henry Edward and William Henry, began trading as H & W Smith. In 1818 they moved to Duke Street, Mayfair, and by 1820 were in a position to open a second shop in the Strand, London. William Henry became the driving force in the business, and in 1828 the firm became known as WH Smith.
The opening of the business coincided with dramatic economic and social changes in Britain. The industrial revolution and a sharp acceleration in the growth of London changed the way the English lived; among the changes was the increase in importance of newspapers and journals. These catered to a new demand for keeping track of fast-moving economic and political developments and the turbulent international politics of the time, and provided a medium for advertising, which was becoming increasingly important as the English economic structure changed and new kinds of enterprises emerged. Another effect of the economic changes was the construction of an improved network of roads, allowing comparatively swift transport by stronger, safer horse-drawn coaches. William Henry Smith spotted the opportunities offered by these developments and changed the focus of his business from simply retailing publications to distributing them. He built up a fleet of light coaches and fast horses and began carrying papers from London along the new roads to stagecoach stops in the country, allowing rural readers access to metropolitan newspapers more quickly than ever before.
It was another product of the industrial revolution—the railway—that allowed the firm to grow dramatically into the leading newspaper seller in the United Kingdom. The railway network spread quickly across the country during the 1830s and 1840s, and William Henry Smith's son, William Henry Smith II, recognized the potential of the new system for newspaper distribution. The younger Smith had reluctantly abandoned his plans to become a clergyman and agreed to join the business in 1842, at the age of 17, and soon showed himself to be as perceptive a businessman as his father. After being made a partner in 1846, giving the company the name WH Smith & Son, he took the opportunity offered when the London & North-Western Railway (LNWR) invited tenders for the sole bookstall rights on its lines. WH Smith & Son opened its first railway bookstall at Euston station, London, in 1848, signed a similar deal with the Midland Railway two weeks later, and soon won contracts with other railway companies.
Control of a monopoly retail operation at the heart of the mass transport system gave the company a perfect position from which to benefit from the booming British economy of the late 19th century. The volume of trade was big enough by 1853 for the firm to buy its first news wholesaling warehouse in Birmingham, the first in a large network of warehouses developed over the next few years. In 1849 William Henry Smith II broadened the company's base by creating a book department, and in 1851 he signed the first contract to handle advertising rights at railway stations with the LNWR, beginning an outgrowth of the business that developed swiftly. WH Smith & Son's railway bookstalls and the advertising space they sold made the company a ubiquitous presence in Britain throughout the second half of the 19th century, and created its position as one of Britain's retailing giants.
The success of the firm allowed William Henry Smith II to enter politics. After becoming a member of parliament in 1868, he retired from active partnership in the company and became in turn Parliamentary Secretary to the Treasury, First Lord of the Admiralty, Secretary for War, Irish Secretary, First Lord of the Treasury, and Leader of the House of Commons. His public prominence and attitudes prompted the humorous magazine Punch to nickname him "Old Morality." On his death in 1891, his widow was made Viscountess Hambleden and his 23-year-old son, Frederick, who later became the second Viscount Hambleden, became head of the company.
Shifting from Railway Shops to High Street Locations: 1900–72
The company continued to develop steadily under Viscount Hambleden—opening a shop in Paris in 1903, followed in 1920 by another in Brussels, Belgium, and a bookbinding works in 1904—until its core business was threatened by a crisis in 1905. When contracts for the 200 bookstalls on the Great Western and LNWR lines ran out at the end of that year, the railway companies demanded higher rents from WH Smith & Son. The company decided that it could not afford the new prices and decided to deal with the loss of the railway bookstall monopoly by opening new shops near the stations, on the station approaches wherever possible. The replacement program succeeded, and the company managed to retain its sales despite the loss of the business upon which it had been founded. The opening of the new shops turned WH Smith & Son's operations into a more conventional newspaper, book, and stationery retail chain, and became the basis of its activities for most of the 20th century.
Viscount Hambleden died in 1928 and was succeeded as head of the company by his son, the third Viscount Hambleden. The need to pay death duties prompted the transformation of the firm into a private limited liability company in 1929. A similar process took place after the death of the third Viscount in 1948; a public holding company, WH Smith & Son (Holdings) Limited, was formed in 1949 to buy up all the share capital, which had been held by Viscount Hambleden, and issue shares publicly.
During the 1950s, the company began to branch out beyond its traditional business under the first chairman of the public company, David Smith, the third viscount's brother. During this decade WH Smith made its first major move into another country, opening several branches in Canada, first in Toronto and later in Ottawa and Montreal. The company also diversified within the United Kingdom by expanding into the specialty book market in 1953 with the acquisition of the Bowes and Bowes group of bookshops, which included City Centre Bookshops, Truslove & Hanson, and Sherratt & Hughes. The company also broadened its activities by adding recorded music to its shelves. The continuing growth in sales prompted the company to reorganize its retail distribution network, transferring the center from Lambeth in south London to a custom-built warehouse in Wiltshire. In the same period, one of the last vestiges of the old railway-based retail network ended when, in 1972, the company decided not to renew its contract for 23 main bookstalls and 63 kiosks in London underground stations after operating there for 70 years.
Diversifying Widely: 1973–89
In 1973, under a new chairman, Charles Troughton, the company launched a radical departure from its core business when it joined in a consortium bidding to take over the travel agency company Thomas Cook. The bid failed, but WH Smith pushed ahead with its plans to enter the travel agency business, opening a chain of agencies operating from within its existing shops in 1973. The company undertook a more ambitious move to diversify under the next chairman, Peter Bennett, when it entered the do-it-yourself hardware market in 1979, paying £12 million for the LCP Homecentres chain, which it renamed Do It All, and expanding the chain. This was the first significant step away from the company's traditional businesses and existing shops, and it set the tone for the wave of diversification that was to follow in the 1980s under Simon Hornby, who was appointed chairman in 1982.
Following the move into hardware retailing, WH Smith's next steps to broaden its base took it into the television industry. Aiming to take advantage of the opportunities arising from cable and satellite television in Europe, in 1983 the group established WH Smith Television, a subsidiary designed to supply the industry with programs and related services. The group's involvement in television deepened the following year, when it bought a 15 percent stake in a cable television channel, Screen Sport, and paid £8.5 million for a 29.9 percent slice of Yorkshire Television. In 1985 the company added to these acquisitions by taking a stake in British Cable Programmes, a move that the Financial Times said "reinforces the company's emergence as the most significant investor in cable TV programming, after Thorn EMI." Later that year the company launched a satellite-delivered cable television channel marketed mainly toward women.
WH Smith also made a major move into the United States in 1985, paying $65 million for Elson, a chain of gift shops with 189 outlets in hotels, airports, office blocks, and railway stations throughout the country. The purchase was WH Smith's second attempt to break into the U.S. market, following the establishment in 1979 of an operation responsible for publishing and wholesaling English books, which took heavy losses. Hornby assured financial analysts that the earlier effort had been badly managed and that the latest entry would be very different.
In 1985 the company also increased its involvement in the recorded music industry, paying about £5 million for Music Market, a chain of 20 music shops. This move was a precursor to a bigger acquisition in the music market the following year, when the company paid the share equivalent of £46 million for the Our Price Music Ltd. record shop chain, bringing another 130 shops in London and southeast England into the group. A month later WH Smith expanded its stationery retailing activities by buying 75 percent of a greeting card and stationery business, Paperchase. The group also took the next step in its travel industry plans in 1986 by opening 100 freestanding travel agencies. The rash of acquisitions continued in 1987 with the group buying 32 retail outlets in Hawaii, bringing its total number of U.S. outlets to 308. It expanded its travel operations by paying £5.7 million for 32 travel agencies owned by the Ian Allan Group and bought a controlling interest in a television and video production company, Molinaire Visions.
However, as WH Smith diversified swiftly into new businesses, it received a serious blow to its oldest operation. When Rupert Murdoch's News International moved production of its British national newspapers into its new nonunion plant at Wapping in 1986, it appointed the Australian-based transport group TNT Ltd. as its transport contractor, ending WH Smith's 190-year-old role as distributor of the Times and the Sunday Times. With the papers delivered by road, the company's business delivering them from railway stations to shops and newsstands was redundant. In late 1987, TNT and News International signed an agreement consolidating TNT's move into the wholesale newspaper distribution market. This change cost WH Smith an estimated £40 million in annual sales. The group recovered most of these losses, however, in 1988 when it won wholesale distribution contracts from Express Newspapers, Mail Newspapers, and Mirror Group Newspapers worth an estimated £25 million. In the same year, the company changed its name from WH Smith & Son (Holdings) Ltd. to WH Smith Group PLC.
The problems in newspaper distribution did not stop WH Smith from pushing ahead with new areas of activity during 1988. In addition to its newspaper and book distribution divisions, the company created a third distribution area by moving into the commercial stationery supplies market, buying two stationery suppliers, Pentagon and Satex. It added to its recorded music operations by paying £23 million to Virgin Group for 67 of its smaller music shops and seven sites allotted to new shops. In a deal worth about £40 million, the group also leased two transponders—radio or radar devices which, upon receiving a signal, transmit a signal of their own—from the Luxembourg television satellite, Astra, to transmit a sports channel in which it was the major shareholder, as well as reinforcing its core business by buying a chain of 21 news agencies from Next. At the same time, the group rationalized its book operations by selling its 50 percent share in the U.K.'s largest book club, Book Club Associates, to joint owner Bertelsmann, the West German publishing group, for £60 million.
The breadth of the expansion during the 1980s left the group somewhat unwieldy, and in 1989 management began to dispose of a number of businesses, notably its North American operations. The most prominent of these was the sale of the group's Canadian subsidiary, WH Smith Canada Ltd., which had been operating for nearly 40 years. The trigger for the sale was an order from Canada's government for the group to sell 49 percent of the Canadian subsidiary to domestic investors to ensure a high level of Canadian ownership in the book industry. The company responded by pulling out of Canada completely, selling its entire 86.5 percent stake in the Canadian operation for about C$50 million. The sale included 133 WH Smith bookshops, 82 Classic Bookshops, 91 card shops, and a wholesaler of foreign newspapers and magazines, Gordon & Gotch. As part of a strategy to focus on retailing operations in the United Kingdom and the United States, in 1989 the group also sold its U.S. wholesale news division for $30 million, shortly after selling its U.S. publishing interests to Penguin Books U.S.A., a subsidiary of Pearson PLC. The company reduced its activity in Hawaii by selling a string of 24 shops, and 14 of WH Smith Travel's outlets were also closed.
The company had meanwhile increased its involvement in the U.K. book retailing industry by acquiring a controlling interest in the Waterstone's chain of 31 bookshops, the second largest independent chain in the country. The 1989 deal raised WH Smith's share of the U.K. book market from about 17 percent to 20 percent. The company merged the newly acquired shops with its existing subsidiary of 47 bookshops, Sherratt & Hughes. The commercial stationery arm was enlarged by the purchase of Sandhurst Marketing and Cartwright Brice, while the group also bought the remaining 48.9 percent of Molinaire Visions, which was experiencing problems. These and the previous commercial stationery acquisitions formed the basis of an office supplies division, WH Smith Business Supplies, which was established in 1989.
1990s and Beyond: Refocusing on Bookselling, Entering Book Publishing
WH Smith reorganized its noncore operations in 1990 by merging its Do It All chain of do-it-yourself hardware shops with Payless, a similar chain owned by the pharmaceutical retailing company Boots. WH Smith owned 50 percent of the new operation, which retained the Do It All name, and was expected to have annual sales of £550 million to £575 million. The company also extended its involvement in the U.S. recorded music market when it paid $23 million for a chain of 49 record shops in Pennsylvania, which it integrated with Wee Three, its existing U.S. chain of 36 music shops.
In 1991 the group's new operations in diverse markets began to appear uncertain, partly because of the impact of the recession in the United Kingdom that began toward the end of 1990. In January the company announced that profits in the previous six months had fallen by 7 percent, and as the year progressed, analysts predicted that profits would remain static. After spending an estimated £435 million to fund acquisitions and organic growth over the previous years, the company announced in May a major restructuring of its operations, including the sale of some of its largest noncore businesses and a refocusing on the traditional retail operations. As the U.K. financial journal Investor's Chronicle put it, the forays into satellite television, do-it-yourself retailing, and travel had failed. In view of the unexpectedly slow progress of the cable and satellite television market, the company announced the sale of its money-losing satellite television business, WH Smith TV, which had already absorbed £80 million of the group's money and was still believed to be two years away from breaking even. A consortium that included the French television company Canal+; the U.S. communications company Capital Cities/ABC; and the French water company Compagnie Generale des Eaux, paid £65 million for the television subsidiary. Also in 1991 WH Smith sold its travel agency business and launched its first rights share issue, aimed at attracting £147 million to finance a three-year expansion program in its core businesses and help reduce a £170 million debt left over from the company's previous rash of acquisitions.
Following these retrenchments, WH Smith moved forward on the music retailing front with the acquisition in 1992 of a 50 percent interest in Virgin Retail, operator of 14 Virgin Megastores, which sold videos, music CDs, and computer games. That same year, WH Smith acquired 59 stores from Record World and 20 stores from National Record Mart, using these outlets as the base for a new U.S. music retail chain, called The Wall. Two years later, the Our Price music chain was merged with Virgin Retail, forming Virgin Our Price, which was 75 percent owned by WH Smith and 25 percent owned by Virgin Group and which became the largest music retailer in the United Kingdom with annual sales of £350 million.
By the mid-1990s, the core WH Smith chain was suffering from declining sales and profits, with some analysts contending that the company's management had neglected the chain—letting the stores become dull and uninviting—because of the distractions of the remaining diversification ventures. The WH Smith chain was also facing increasing competition from specialty music and book chains and from grocery superstores, the latter of which were being rapidly expanded and included among their vast inventory books, newspapers, magazines, videos, and stationery—the very heart of the WH Smith chain. In response to the chain's travails, a remodeling program was launched, spending on advertising was increased, and the management took a more aggressive approach to promotions.
A turning point for the company as a whole came in 1996, the same year, coincidentally or not, that Philip Smith stepped down from the board, ending the involvement of the founding family in the company management. Early in that year, Bill Cockburn, who had been chief executive of the post office, replaced Malcolm Field as group chief executive. Cockburn immediately set upon a major strategic review of the group's operations. Cockburn quickly proved the wisdom of bringing in an outsider, when he made a number of major changes to the group's composition. In April 1996 WH Smith Business Supplies was sold to Guilbert, a French office supplies company, for £142 million. WH Smith also offloaded its share of the troubled Do It All chain, selling the stake to Boots at a loss of £63.5 million. Also divested was Paperchase, the greeting card and stationery chain. Cockburn made other changes as well, including a workforce reduction of 1,100, the closing of the group's Sloane Square headquarters, and the writing off of a significant amount of stock at the WH Smith chain in an effort to narrow the offerings and free up space for more productive lines. For the fiscal year ending in June 1996, WH Smith posted a pretax loss of £195 million, the first loss in the 204-year history of the company. Much of the loss was attributable to the sell-off of Do It All and to writeoffs taken for the reduction in stock at WH Smith and for the employee cutbacks.
Cockburn's eventful stint as the head of WH Smith ended abruptly in June 1997 when the executive left to take a senior position with British Telecommunications. In September of that year, a 32-year company veteran, Richard Handover, was named chief executive, a move that disappointed many analysts who were hoping for a fresh infusion of new blood from outside the group. Less than one month after taking over, Handover faced a takeover bid from Tim Waterstone, the founder of the Waterstone's chain. Handover and the WH Smith board rejected the bid, deciding instead to refocus the group on three core businesses: WH Smith High Street, the core retail chain; WH Smith Europe and International Travel Retail, consisting of retail stores and newsstands located in train stations and airports in Europe, the United States, and Asia; and WHSmith News, the group's newspaper and magazine distribution arm. To this end, the group exited from the specialty music retailing sector by selling The Wall to Camelot Music Inc. for £28 million ($47 million) in 1997 and by selling its 75 percent stake in Virgin Our Price to Virgin Retail Group for £145 million the following year. Also in 1998, WH Smith sold its controlling stake in Waterstone's for £300 million to a firm jointly owned by EMI Group plc and Advent International.
While continuing with efforts to enhance the performance of the WH Smith chain, Handover also moved quickly to use the proceeds of the divestments to fund targeted acquisitions. In 1998 WH Smith purchased the retail outlets of newspaper distributor John Menzies for £68 million. Gained thereby were 140 retail units in England and Wales, which were rebranded under the WH Smith name, and about 90 stores in Scotland, which continued to use the John Menzies name under a license arrangement (there having been no WH Smith outlets in Scotland). WH Smith also bought the Internet Bookshop that same year, relaunching it the following year as WHSmith.co.uk, an e-commerce site selling books, CDs, videos, and DVDs. WH Smith also made a surprising move into book publishing during 1999, first acquiring Helicon, the leading U.K. publisher of consumer and educational reference material, then purchasing Hodder Headline, one of the most venerable trade publishing houses in Britain, for £185 million. By becoming a content producer, WH Smith hoped to distinguish its retail chain from its competitors by developing proprietary products that would be available only through the chain. Acquisitions continued in 2000 with the purchase of Hazelwood Enterprises Inc., operator of 71 hotel-based bookstores in the United States, for £12 million ($19 million).
Also during 2000 WH Smith launched an effort to create its own national magazine distribution system. This effort was greeted with loud protests from magazine publishers worried about the death of small-circulation titles and from independent newsagents concerned that the effort would put them out of business. WH Smith finally relented in early 2001, abandoning the effort and taking the further step of putting WHSmith News up for sale. The sale of the newspaper and magazine distribution unit would mean that the group could focus fully on its retailing and publishing operations. In July 2001 WH Smith announced that it had reached an agreement to sell WHSmith News to ABN AMRO Private Equity (UK) Limited for £215 million in cash. The deal was subject to shareholder approval as well as the negotiation of new contracts between WHSmith News and its major customers and suppliers, leaving completion of the sale somewhat in doubt. Proceeds would likely be used by WH Smith to fund further growth of its core retail and publishing units. WH Smith had already showed its desire for more acquisitions in June 2001 when it acquired Blue Star Consumer Retailing Group, the leading bookseller in Australia and New Zealand, for £38 million. Blue Star conducted business primarily under two brands, Angus & Robertson in Australia and Whitcoulls in New Zealand, operating 184 company-owned retail outlets. This acquisition was part of WH Smith's strategy to expand its book retailing presence within the English-speaking world.
Principal Subsidiaries: WH Smith Trading Limited; Hodder Headline Limited; WH Smith UK Limited; Hambleden Estates Limited; WH Smith Group Holdings (USA) Inc.; WH Smith France SA; WH Smith Singapore Pte.; WH Smith Hong Kong Limited; WH Smith Australia (Pty) Limited; Hodder Moa Becket Publishers Limited (New Zealand); Lexicon Book Company Limited.
Principal Competitors: HMV Media Group plc; Virgin Group Ltd.; John Menzies plc; Dawson Holdings Plc; Lagardère SCA; MTS, Incorporated; Bertelsmann AG; Amazon.com, Inc.
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