WFH Smiths: Retailer to cut jobs due to reduced footfall
September 2, 2020
3 min read
What's going on here?
High Street retailer WH Smith is considering cutting 1,500 jobs due to low footfall suffered resulting from the coronavirus pandemic.
What does this mean?
The stationery and book retailer has cut around 11% of its workforce as a cost cutting measure following pandemic-induced losses and site closures may still follow. The company’s travel sites have been hardest hit, as airports and railway stations have seen few customers as lockdown has been gradually eased. The company’s revenue fell by a staggering 92% in the first month of lockdown.
WH Smith had relied heavily on its travel sites as a way of avoiding the shift online that had been impacting other high street stores; these sites made around three-fifths of the business’ profit. The company predicts that it will make a loss of between £70m and £75m from April 2020 to the end of its financial year in August. Whilst the re-opening of the hospitality industry on 4 July 2020 led to a boost in travel and spending, public fear of a second wave of infections has meant many are still staying at home.
What's the big picture effect?
WH Smith is just one of many high street names being forced to cut jobs and consider site closures because of the pandemic. Clothing retailer M&Co has said it is cutting 340 jobs and closing 47 stores, while betting shop William Hill has said that 119 of its sites will not reopen post lockdown. Pizza Express, DW Sports and Hays Travel have also announced plans that could put jobs at risk. In total, over 40,000 members of staff have been made redundant in the hospitality and retail industries since the start of the pandemic; there are fears that footfall on Britain’s highstreets may never return to pre-Covid levels. According to the CEBR economic thinktank, London commuters alone would have spent £2.3bn in shops, pubs and restaurants between March and June 2020 if they had been commuting as normal, highlighting the damage the pandemic has had on the economy.
It is feared that these job losses are just the tip of the iceberg; many businesses are being forced to decide whether to keep furloughed staff as sites re-open. As the furlough scheme is brought to an end, we can expect to see an increase in redundancies due to this. The Office for Budget Responsibility has forecasted that unemployment will rise to 3.6m by the end of the year.
WH Smith has estimated that job cuts and associated business restructuring would cost between £15-19m. This high street disruption provides commercial law firms with an opportunity to be involved in the restructuring and insolvency processes. A lot of the work that city firms do revolves around corporate restructures and insolvencies, and lawyers can be involved through providing advice on the best course of action, or advising on the sale of assets. Linklaters, for example, has been drafted in to assist lingerie retailer Victoria’s Secret, as the business fell into administration in June.
The news from WH Smith is as bleak as it is unsurprising. As a nation, we are just beginning to come to terms with the fallout of the pandemic and lockdown. For so long as the high street remains sparse, retailers will be forced to make tough decisions.
Report written by Rowenna Allen
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