Recovery in the retail industry is beginning to gather momentum; although five high street chains entered into administration last week, results are showing that on the whole consumers are once more beginning to spend in earnest. However, retail is still trailing behind other sectors, with the service and manufacturing industries posting hugely positive growth and employment statistics in the past month.
In essence, this is the ideal time for investors looking for a foothold in the retail industry or groups seeking to expand to make a move on high street brands. Recovery is still in the early stage which keeps company value in check, but the boom in consumer confidence indicates strong profits ahead.
Perhaps this is why a number of the UK’s most successful private equity firms are now crossing swords in a bid to take control of high street staple Card Factory.
Current owner Charterhouse acquired the business in 2010 from founders Janet and Dean Hoyle, and has recently enlisted Goldman Sachs to assess a number of strategic options designed to make the business more profitable. These methods include an extensive refinancing programme and even flotation on the stock market – something which, now that the economy has stabilised and the retail industry is in recovery, could gain huge returns for shareholders.
However, instead of pressing ahead with these plans, Charterhouse has placed the brand on the market with industry experts forecasting an eventual deal worth over £500 million for the 650-store business.
Private equity firms such as Cinven, KKR, Clayton Dubilier & Rice and Advent International are all thought to have entered bids before last Wednesday’s deadline, along with a number of anonymous interested parties. Clayton Dubilier & Rice is certainly no stranger to the high street, having purchased discount chain B&M Retail only last year, and as such is assumed to be one of the front-runners in this race.
Card Factory already has an extensive commercial property presence, but it is believed that any buyer will also acquire the blueprint of an impressive growth plan designed to maximise the chain’s existing consumer base. While this is a good incentive for high bidders, however, the business’ profit margin remains the most attractive aspect of the deal; as Card Factory designs, sources and prints all of its own stock it can offer customers lower prices and also save on external fees which is useful in building up capital.
While the high street may have suffered several blows in the past few years, it is heartening to see strong chains commanding such a strong position when placed on the market. By enticing new investors into the retail industry, there is a real chance that a diverse field of promotional activities and a fresh outlook will both stabilise and speed up recovery.
Do you think Card Factory will prove to be one of the high street’s strongest brands in years to come, or is its success entirely dependent on the direction it is taken in by the eventual buyer?
Previous Post
Whiteley Shopping Centre Enjoys Bumper First Month
