RogerBW's Blog

Corporate Dead Pool, 2018 edition 28 August 2018

Which companies are going to go under soon?

I can't help looking hard at W. H. Smith. Newspapers are a drag on their profitability; they've tried to get into ebooks but without much success (though they are certainly the best place to buy a Kobo in the UK, for those of us who don't want Amazon DRM lock-in); whenever I see one they tend to have only the books that sell fast (bestsellers, textbooks in school season), which other more agile shops can do more efficiently; their selection of stationery has regressed significantly in the last twenty years. Net income is less than 10% of revenue, which is not bad but not solid either.

They have lots of valuable high street property (which mostly hasn't had any money put into it for years) which could be turned into artisanal coffee bars, and (the one thing I think is actually a major income source) a presence in railway stations, motorway service areas and hospitals.

So the obvious thing to do is to close down and sell off the high streets and concentrate on the captive markets that can be gouged on price. The main question in my mind is whether they'll do it themselves or get bought out and have it done to them.

I also wonder about Marks and Spencer, which is busily divesting itself of shops, but has a net income about 1% of revenue, low enough to be wiped out by a change in the wind (or, say, further collapse of sterling); turnover has been broadly stable over the last few years, but income has been dropping. Selling off the shops is only a solution if you know what you're going to do instead, and they show no sign of that other than "more of the same".

Tags: real life

  1. Posted by Owen Smith at 04:45pm on 28 August 2018

    Marks and Spencer shirts used to fit me very well. Then they changed the tailoring such that they hung all wrong on me, and they lost my business as a result. I wonder if they gained anyone else as a replacement customer?

  2. Posted by Michael Cule at 08:26pm on 28 August 2018

    I could live without W H Smith (though if they go there will be another huge hole in Wycombe High Street, just a little way down from where Argos has decamped) but I like M&S, more for their food section than their clothing.

    Just about all shop chains are in trouble at the moment: the Internet does things so much better. There are still things I want to pick up and look at before I buy though. I have had many, many regrets about clothing bought on the Internet.

    I wonder (on a slightly tangential matter) whether ALDI and LIDL will continue in the UK after Brexit.

  3. Posted by RogerBW at 09:36am on 29 August 2018

    I suspect that an empty shop may still be worth more to the owner (because it sits on their books as a high-valued asset) than it would be if they dropped the rent and got in a tenant (because then they'd have to revalue it at a multiple of current rent). Accounting rules distort things.

    For what it's worth, M&S's food operation is doing better than the clothing side at the moment.

    I'm told that WHSmith sandwiches are pretty good. If I wanted a sandwich on Wycombe High Street they wouldn't be the first place I'd think of, mind.

    Aldi is apparently opening a new branch in Wycombe next month (on Baker Street, quite close to Lidl), so that suggests that either they expect to be around for a while or they think they can make a profit by selling it (at a time when lots of other companies will be selling).

  4. Posted by Owen Smith at 01:59pm on 30 August 2018

    In Cambridge and at my parents in Holmfirth, empty shops are usually filled by yet another charity shop. They're the only ones that can afford to be in the hight street, because being charities they don't pay business rates so only have the rent to pay.

  5. Posted by Dr Bob at 03:21pm on 03 September 2018

    WH Smith in my home town stopped selling computer games & DVDs (possibly because of shoplifting) but actually has a decent selection of books, including military history. The latter is I'm guessing because of the Royal Marines Commando base in the town.

    I haven't been to the local WHSmith for a while, but they used to be my first choice for seeing a decent selection of DVDs.

    M&S was one of the places I thought would be 100% certain to have 'smart' office clothes when I changed jobs. But they failed at the 'I need pockets' hurdle.

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