Consumer sector comment – November 2010

Dato

When you read this cyber Monday will have been and gone. It is predicted to be the busiest shopping day of the year. According to a survey by You Gov 45% of UK adults with web access plan to shop online between 29 November and 6 December with 27% to spend over 200 GBP online for Christmas gifts this year.

Britons are Europe’s biggest on-line shoppers spending nearly twice as much as the French and Germans. They spend more than £1000 every six months and make 19 purchases a year on retail web sites such as Best Buy and Amazon. So is the search for stocking fillers on the UK High Street set to become a thing of the past?

It’s no surprise that this trend has been reflected in our advisory work for on-line and multi-channel businesses. As well as this month’s sale of Mankind to The Hut, we are working with several other fast growing profitable businesses in this space seeking development capital, responding to investors who continue to be more attracted to businesses with strong direct element to their growth plans.

The constant promotions and offers in nearly every high street retailer are an indication that every sale is hard won – “no promotion = no footfall”. Despite overall sales holding up surprisingly well, it is a reminder that there will continue to be casualties as the ever demanding consumer determines winners and losers in the retail space.

Deals

Clearwater’s Consumer team has advised Mankind Direct (incorporating www.Mankind.co.uk & www.BeautyExpert.co.uk) on its sale to The Hut Group. Mankind Direct is the UK’s largest online male grooming and skincare business, generating £5m in sales over the last 12 months. The transaction follows an earlier acquisition in the sector this month by The Hut Group, who acquired the Lookfantastic Group for £19.4 million. Lookfantastic is the UK’s largest online Health & Beauty retailer with online operations which include lookfantastic.com, lookmantastic.com and beautysleuth.co.uk, as well as owning a training centre for hairdressers and a number of Salons in the South East. These latest acquisitions are part of The Hut Group’s strategy to become one of Europe’s leading online players.

Scotts & Co, the multi-channel catalogue retailer, has acquired the catalogue and online businesses of Isle of Wight fashion retailers Artigiano and Spirito di Artigiano. The acquisition sees Scotts & Co now comprise 12 separate trading businesses with sales in excess of £70 million. With more than 30 million catalogues mailed each year, Scotts & Co is one of the largest independent multi-title catalogue retailers in the country with brands that include: Scotts of Stow, The Original Gift Company, The Expert Verdict, Viva Direct, Solutions from Renwoods, Cucina Direct, Traditional Garden Supply Company, Ancestral Collections, Presents Direct, Bloom and Prestige Cellars.

Doughty Hanson, the private equity group, is to acquire Vue Entertainment from Cavendish Square Partners, an affiliated investment fund of Och-Ziff Capital Management. Vue Entertainment is one of UK’s leading developers and operators of multiplex cinemas. Several of the existing management team including founder Tim Richards will be reinvesting alongside Doughty Hanson. With the third largest market share in the UK in terms of box office receipts, Vue has 68 cinemas comprising 678 screens.

Harris Watson Holdings plc, which owns several textile brands through its Waterlinks Investments Group, is to sell Hawick Knitwear to the company’s managing director, Mr Benny Hartop. Incorporated in 2000, Hawick Knitwear is a contract and private label knitwear manufacturer born out of a heritage in Scottish knitting that can be traced back to 1874.

Scottish Midland Co-operative Society has acquired Botterills Convenience Stores, a Blantyre, UK-based convenience store operator with 51 convenience food stores. Scotmid is Scotland’s leading independent co-operative which, post acquisition, will own almost 200 convenience food stores throughout Scotland stretching from north of Inverness to Dumfries in the south. Botterills was a family owned multi branch convenience retailer based in High Blantyre operating their stores under the Spar franchise, employing around 1000 people. It is anticipated that all of their stores will be rebranded to Scotmid Co-operative over the next few years.

It has been reported that the Scottish award winning multi-channel footwear retailer, Schuh, has secured a new refinancing package worth £40 million from Lloyds Banking Group Corporate Markets. The funding is being used to support further expansion, enable the exit of certain retiring shareholders as well as enhancing the equity stakes of the remaining management team led by managing director, Colin Temple, and finance director, Mark Crutchley.

Camping to school trips specialist, Holidaybreak plc, has acquired a 50% stake in Meininger, a student and school tour accommodation business in Germany for £31 million, with an option to acquire the balance of the shares over the next two to three years. Headquartered in Berlin, Meininger employs over 250 staff and operates 10 properties in Berlin, London, Vienna, Munich, Frankfurt, Cologne and Hamburg. Holidaybreak is the owner of the Eurocamp, Keycamp and PGL brands with group revenues of £461.7 million and listed on the London Stock Exchange.

Thomas Cook has entered into a joint venture with VAO Inturist, a Russian tour operator, to enable the Peterborough holiday group to expand into the Russian market which its sees as an important growth area. Thomas Cook will own a 50.1 per cent stake in the new company, with VAO Inturist holding the remaining 49.9 per cent stake. VAO Inturist will transfer its tour operating and travel retail businesses into the joint venture, whilst Thomas Cook’s investment will be via a mixture of $10 million in cash and $35 million worth of Thomas Cook shares.

Paramount Restaurants, the London-based restaurant operator, has sold 28 restaurants to 12 different bidders including Tragus, Gondola Holdings, Prezzo, Giraffe, Costa Coffee and Busaba Eathai. Meanwhile Living Ventures has acquired 5 restaurants from Heathcote Restaurants, a Preston UK-based restaurants operator.