WHSmith takeover: A closer look at Modella Capital and TGJones

WHSmith is set to disappear from British high streets after its parent company sold the business to private equity firm Modella Capital to focus on its rapidly expanding travel arm.

The £76m deal, which did not include the retailer’s branding, will see its 480 stores across high streets, shopping centres and retail parks rebranded to TGJones and the division’s managing director Sean Toal step in as chief executive.

The sale marks the end of an era for WHSmith, which has been a staple of the British high street for over two centuries since opening its first store in London in 1792.

It is also Modella’s largest acquisition date and its fourth retail acquisition in just eight months. Retail Gazette takes a closer look at the private equity firm and its ambition for WHSmith’s high street store estate.

What is Modella Capital? 

Modella Capital has built up its retail portfolio at speed in recent months, successfully acquiring Hobbycraft last August and The Original Factory Shop in February.

The boutique firm is also in the running to acquire a stake in Lakeland.

It has now added to WHSmith’s high street division to its portfolio, which reported a tidy profit of £32m against sales of £452m in the group’s latest financial results.

Modella is linked to private equity house R Capital and is chaired by Steve Curtis, who has 40 years of retail sector experience and is connected to the rescue efforts and subsequent sales of Ted Baker, Paperchase and Jigsaw.

The firm emerged on the scene last summer after it placed a bid to rescue The Body Shop from administration. It eventually lost out to a consortium led by the British cosmetics tycoon Mike Jatania.

Prior to that, it’s only notable acquisition was Ted Baker’s UK licensing partner No Ordinary Designer Label in November 2023, which collapsed into administration earlier this year.

According to its website, Modella says its “investments are focussed on retail and FMCG businesses with a turnover of £10m to £1bn across the UK and Western Europe”. It also owns online retailer Crafter’s Companion and shopping channel Create & Craft.

GlobalData lead retail analyst Zoe Mills believes Modella is a “good fit” for WHSmith’s high street arm, with the firm able “to take learnings from Hobbycraft to enhance its proposition and give these high street locations a much-needed injection of cash to bring them up to scratch”.

What is TGJones?

The sale of WHSmith’s high street business does not include the retailer’s branding and as such, its stores will be rebranded to TGJones following a “short transition period”.

Mills argues that a “significant” challenge Modella faces is that the firm is losing the WHSmith name under the terms of the deal.

“Given its long history and the affection it is held in by consumers, it is not clear how easily a transition to TGJones will be received,” she says.

The name has already sparked confusion among shoppers, with many wondering if the new brand is a tribute to Thomas George “TG” Jones, who played for Everton and Wales in the 1930s and 1940s but passed away in 2004.

However, the firm has made it clear that the new name is “not reference to any individual” and was instead chosen for the “family appeal”.

Retail consultant Graham Soult notes that Modella’s trademarks of potential TGJones logos show its keen not to drift too far away from the branding that many shoppers have become familiar with, choosing a similar font and shade of blue.

“Clearly the plan in the first instance is to emphasise continuity, but, there is an argument where maybe it would have worked better for the brand to look completely different,” he says.

A sense of continuation rather than revolution also applies to the TGJones’ in-store offer – at least initially. Modella has confirmed that TG Jones stores will retain much of the existing product offerings, including in-branch Post Offices and Toys “R” Us concessions.

The business add that it will “work closely with the management team to define and execute a strategy to introduce new ranges and other offerings in the future”.

Soult says the “obvious thing is to look at what other businesses Modella have”, suggesting that selling crafting products from Hobbycraft could work effectively on the high street.

He points out that the business could also expand its vinyl offer, which the retailer introduced in 80 of its stores last year in response to growing customer demand for the format.

TGJones could also build on WHSmith’s book offer to capitalise on the growth in the market driven by social media trends. One shopper on TikTok spotted that the retailer has started offering book bundles of popular series in some of its stores.

What’s next?

The sale of WHSmith’s high street business is expected to complete in the coming months and Modella has said it will work alongside Toal and the division’s management team to “better understand the business and to develop and agree the future trading strategy”.

In the longer term Mills says a restructuring programme, akin to the ones that Modella has underway for Hobbycraft and The Original Factory Shop, will likely be on the cards.

“WHSmith’s store portfolio has been well managed, and it has an average remaining lease length of under two years, meaning that Modella Capital will not be committed to keeping unprofitable stores open for long,” she explains.

The retail giant said in its latest report that 470 leases for its high street stores are due for renewal over the next three years, including over 100 where it is in negotiations with landlords. It has so far shuttered more than 17 stores this year alone.

Mills argues that the new owner “should consolidate [the] store portfolio, shutter inefficient stores, and improve the remaining store estate to bring all remaining locations to a high standard”.

In terms of how successful of an acquisition WHSmith’s high street business, Soult argues will depend on “the quality of the customer experience and what investment those stores get in the future”.

Either way, it seems that WHSmith’s legacy on the high street lives on – even if it is under new branding.

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