When I looked at WH Smith last year I was surprised to find a high growth company.

The impression I get from its high street stores is of a “stalwart”; a very mature business in a mature industry which is, if anything, being squeezed by the world of online retail.

That image is largely correct, but it ignores the best part of WH Smith – its passenger-facing business.

Travel is WH Smith’s engine for future growth

If you have been anywhere near a train station or airport in the last decade there’s a good chance you have seen one of WH Smith’s “Travel” retail units.

The scenario will be familiar to many:

Just as you’re about to metaphorically leap onto a train or plane you realise you need something to eat/drink/read. Never fear, WH Smith is there to help you (and in many cases it will be WH Smith and nobody else, as frequently there is only space available for one retail unit).

With such a captive audience and a lack of competition, prices and profit margins can be higher than is possible on the high street.

Also, given the deliberate sameness of international airports, this travel side of the business is far easier to take international, which is precisely how WH Smith intends to grow.

Thanks to these attractive features the travel side of the business has, for some years, been the company’s major source of profits. I don’t think it will be long before it is the major source of revenue as well.

Squeezing every drop of profit out of a shrinking high street business

The other side of WH Smith’s business is its traditional high street stores.

This business is in long-term decline, or at least is shrinking to whatever size is possible in the modern world.

When I was young I would buy records from WH Smith, but of course that side of things has long since gone the way of the Dodo. Books, of course, are another example of a traditional WH Smith product which is suited to online retail.

The writing is clearly on the wall: There will always be a place for a convenient shop on the high street, but it will be a smaller place than in the past.

Richard Beddard at Interactive Investor recently wrote a short review of WH Smith where he kindly summarised and compared the performances of these two sides of WH Smith over the last few…

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