By Raechel Thankam Job

(Reuters) -WH Smith will receive less-than-expected cash from the sale of its UK high street business to Hobbycraft owner Modella Capital, it said on Monday, citing reduced cash flow due to softer trading and a cautious outlook.

Shares of the retailer dropped 8% in early trading following the announcement.

The company completed the sale of its 230-year-old British high street business on Monday, marking a strategic shift to a pure global travel retail business as the UK consumer market struggles with rising costs and economic uncertainty.

Investors had welcomed the sale of the high street business, which offers products and services like the Post Office and Toys "R" Us, as the division had increasingly weighed on overall performance.

However, the revised sale terms, which are now expected to yield gross cash proceeds of up to 40 million pounds ($55 million) compared with an earlier forecast of 52 million, have raised concern over WH Smith's debt levels.

The company now expects net debt to rise to 425 million pounds by the end of August from its previous forecast of 400 million pounds.

"We think the lower proceeds and spike in near-term debt will be taken negatively by the market and push out the de-leveraging timeframe post the disposal somewhat," J.P. Morgan analysts said in a note.

WH Smith, which announced the sale in March, said it began renegotiating sales terms with Modella after determining that the original agreement "was no longer deliverable".

The retailer, with about 1,200 stores in airports and train stations across 32 countries, said that its travel business was trading in line with market expectations, helped by a seasonal spike in summer travel.

($1 = 0.7301 pounds)

(Reporting by Raechel Thankam Job in Bengaluru; Editing by Mrigank Dhaniwala and Emelia Sithole-Matarise)