At least half of WH Smith high street stores could close under a new owner | WH Smith

At least half of WH Smith’s 500 high street stores could be closed by any new owner, industry experts say, raising the prospect of sweeping job losses at the ailing retailer.

Predictions for the eventual size of the chain, which employs about 5,000 people in its high street shops, range from no more than 250 stores. Offers for the group are expected in the next few weeks and a deal completed by early May.

WH Smith is in talks with potential bidders including the private equity groups Hilco and Alteri, the Hobbycraft owner, Modella Capital, and the HMV owner, Doug Putman, as it aims to focus on its fast-expanding travel business, which is opening outlets overseas as well as in UK stations, airports and hospitals.

They are expected to pay as much as £100m, with assets including the Richard & Judy Bookclub brand, 200 sites that include a large post office, and the rights to distribute Toys R Us products in the UK.

However, Jonathan Pritchard, a retail analyst at the investment bank Peel Hunt, suggested the “risk was on the downside” of that £100m figure, with the business likely to be making profits of less than £16m once central costs and profits from the online business Funky Pigeon, which is not part of the sale, were taken into account.

WH Smith is thought to have told bidders that central costs are less onerous than Pritchard’s calculations and that there is not a large number of loss-making stores.

However, one experienced retail boss said any buyer was likely to want at most half the stores: “I can’t see anybody who would want to run 500 locations of anything on the high street. Some sites are brilliant, but some clearly aren’t.”

With the average lease length less than two years, some property experts said there was “an opportunity to shrink” WH Smith and reduce the portfolio to a “hardcore” of stores, with the 200 outlets containing big post offices most likely to be retained.

WH Smith has already been reducing its high street estate, with 14 closuresin 2024 and 17 planned this year.

“I don’t see anybody is going to buy WH Smith without needing to put it into some sort of restructuring process,” said Jonathan De Mello, a property expert.

Another property expert said: “A lot of stores are underinvested. It has a diminishing but still valid place on the high street, but I don’t see a white knight coming over the horizon. It makes money, but not a lot, and it is hard to make money. It has been run to the absolute bone.”

Some retail insiders expect unwanted stores to be sold off in parcels to retailers such as Marks & Spencer or The Range.

Pritchard said that if downsizing WH Smith dramatically were the route to a more robust business, the retailer would have already made that move.

“They have been doing a brilliant job with the asset,” he said. “The stores are not necessarily underinvested but [are] on high streets where footfall is in decline.”

One property expert added that the brand would lose relevance unless it retained a presence in widespread convenient locations. They suggested that potential buyers may even seek a dowry to take the complete chain on.

While it is understood that such a plan is not on the cards, the property expert said WH Smith may have to offer support to secure a deal that saved a decent chunk of the chain. “If WH Smith started closing post offices, the British public would go berserk. The PR would be horrific,” they added.

While WH Smith has said it would not necessarily sell if no strong offer emerges, De Mello said that, having taken the PR flak on the deal, the company was unlikely to back out.

“Sooner or later, a lot of the estate has to go, and they should just bite the bullet,” he said. “There are so many competitors in that space and, a bit like Wilko or Woolworths, the stores have become irrelevant in today’s modern retail market.”