Consumer sector comment – August 2010

Dato

Summer Plans…..

A trawl through recent press shows just how many profitable retailers are using the summer to look for new ways to grow the top-line. With consumer spending expected to slow or at least be constrained over the next 12 months, retailers are recognising that they need to look for growth beyond simple UK store roll-out.

Robert Dyas, now back in the black after its debt for equity restructure, talks of “redesigning its proposition”; Tesco has announced plans to open a standalone F&F brand store in Prague, demonstrating both its commitment to further brand development and continued international rollout; Shop Direct is intending to shift focus to target the over 50’s female market using both own and bought in brands; “Arcadia has re-launched all it’s fashion sites” according to Retail Week, signalling the importance of online to it’s growth strategy; M&S has invested heavily in a new distribution centre intended to dramatically cut furniture lead times from 28 to 7 days ; Dune the footwear retailer builds on the integration of the Shoe Studio brands with plans to expand overseas; Joules intends to target major city centre sites on the back of strong trading, moving from smaller market town sites to larger city centre properties; Mothercare’s acquisition of the Blooming Marvellous brand, to be developed online and in store reflects a trend to buy in smaller niche or growth brands to pull in customers and boost LFL performance.

And finally news that the Perfume Shop has signed a deal with Superdrug for a shop within shop trial.

Such a breadth of strategies for growth suggest that any retailer relying on simple market growth and not thinking beyond its existing business format, is likely to find it’s traditional space being threatened.

Deals

E-Trader Group has raised substantial second round funding from MMC Venture, its existing backer. The funding will be used to support the rapid growth of the business which operates two online marketplaces, stockshifters.com and koodos.com, which it acquired in 2009. Stockshifters.com is the first trade marketplace for secondary goods, providing retailers and manufacturers with a dedicated online facility to sell overstock, end of line/clearance stock and returns to trade buyers. Koodos.com, is one of the UK’s leading private sales clubs offering consumers high-end fashion at discounted prices.

Paperchase is back in private equity ownership after being acquired by Primary Capital in a management buy-out of the business from Borders Inc, for a reported $31 million. Borders Inc, the US-based book retailer, bought the UK’s leading designer and retailer of stationery and greeting cards for a reported £18.6m in 2004 from Graphite Capital, the private equity group which backed a 1996 MBO of Paperchase from WH Smith. Paperchase currently operates 65 own stores and 35 concessions in the UK with international operations in Ireland, Netherlands, Far East and US through further concessions and partnerships.

Mothercare had acquired the brand and trademark of maternity wear chain, Blooming Marvellous, for a reported £3 million from private equity firm Top factor. In February 2009 retail entrepreneur Elaine McPherson acquired Blooming Marvellous out of administration. The business, which was launched in 1983 and grew from a small mail order firm to become a multi-channel retailer with 15 stores and an on-line offering.

My-wardrobe.com has raised nearly £6 million from Balderton Capital, who will hold a minority stake in the on-line fashion retailer. My-wardrobe, founded four years ago by Sarah Curran, sells affordable luxury clothes and accessories from brands such as Mulberry, Vivienne Westwood and See by Chloe. It will use the funding to add more brands and hold bigger stocks of popular items.

Sleeperz Hotels, a budget hotel chain, has raised £7 million from existing investors including Mr Andre Hoffman of Roche, Mr William Kendal, formerly of Green & Black’s chocolate together with new investor Connection Capital. Headquartered in London, the chain has sites in Cambridge and Cardiff and will use the money raised to support the development of a new site in Newcastle with further hotels planned for Manchester, Birmingham and Liverpool.

On 20th July, Enterprise Inns plc, the Midlands based pub operator, announced that it has sold 402 pubs for proceeds of £124 million and will continue its pub disposal programme throughout 2010.

Unilever has sold its Findus frozen food brand in Italy to Birds Eye Iglo Group for EUR 805 million, subject to EU regulatory approval. Birds Eye is owned by Premira Private Equity who will invest a further Euro 300 million of equity alongside further bank debt of Euro 500 million.

Ocado, the online supermarket group, has floated with a market capitalization of £937 million raising £200 million after expenses. Existing shareholders, including John Lewis pension fund, sold shares to the value of £154 million.

Hotel Chocolate has raised £ 3.7 million from customers through its innovative chocolate bonds with returns paid in the form of boxes of chocolates. The funds raised will be used to increase the number of stores, overseas expansion and invest in the factory in Cambridgeshire and cocoa plantation in St Lucia.

AAC Capital Partners has sold its 60% stake in TGI Friday’s UK, the Luton, UK-based restaurant operator, to Carlson for $50 million. Carlson owns and operates the franchise rights to the TGI brand and already owned 40% of TGI Fridays UK. With full ownership of the business, Carlson plans to invest a further $50 million in expanding TGI over the next five years. Carlson is a global, privately held American hospitality and travel company with a strong portfolio of leading brands including Parks Inns, Park Plaza, Radisson and Carlson hotels and restaurants.

Notonthehighstreet.com has received a £7.5 million investment from venture capital firm, Index Ventures. Notonthehighstreet.com was founded four years ago by Holly Tucker and Sophie Cornish as an online retailer selling products that are sourced from small businesses around the country. They will use the funds to enhance the website, expand the supplier base and move into overseas markets. Sales are expected to reach £14 million this year.