Oasis, Coast and Warehouse in sights of Philip Day and Foschini
Retail entrepreneurs often mull bids for up-for-sale brands but they don’t always happen. However when Philip Day shows an interest, we need to sit up and take notice. The Edinburgh Woollen Mill owner who now also owns Jaeger, Austin Reed, Peacocks, Jane Norman and others is reported to be interested in Coast, Oasis and Warehouse.
While Day usually focuses on businesses that have fallen into administration, the Aurora Fashions-owned trio aren’t at that stage. But they are struggling and that puts them squarely in Day’s sights.
He is reported to be looking at a deal to buy the chains, although other big names are in the running too. They include Alteri Investors, which recently exited its Brantano and Jones Bootmaker operations; South Africa’s Truworths, one of Africa’s biggest and most successful fashion retail operators, which also owns the UK's Office footwear retailer; and Foschini, or TFG as it’s known, which also owns Whistles, Phase Eight, and Damsel in a Dress and recently bought Australia’s Retail Apparel Group.
Its a formidable quartet of potential buyers with serious financial clout. All of them could easily find the £100m price tag placed on the retail chains, but analysts think they won’t have to with the tough UK fashion retail backdrop meaning the price is likely to be much lower than Aurora would like.
The Sunday Times reported that potential bids have come in at between £35m and £55m.
The potential buyers are confident that such low offers could succeed because Aurora needs to sell. The owner of the three chains was a company formed in the wake of the financial crisis in the last decade but has struggled to create a successful standalone business. Oasis and Warehouse combined lost £1.2m on turnover of £300.5m in the latest year for which accounts are available (the 12 months to February 2016), although Oasis was reported to have been profitable. Coast’s pre-tax profit was £1.3m of sales of £80.7m.
But even with Oasis and Coast making money, the profits aren’t exactly soaring and any deterioration in the UK retail sector could wipe them out. And a deterioration is exactly what analysts are expecting.
Warehouse has already begun a turnaround programme but under the eventual new owners, the three chains are likely to see even more intensive turnaround efforts. And these efforts could vary widely, depending on who wins the auction.
If Philip Day comes out on top, the three brand would provide a boost to his new Days department store chain that relies heavily on his existing brands. Meanwhile Foshcini could see its hand strengthened in landlord negotiations given a standalone store portfolio that would be radically enlarged, as well as with department stores as its existing brands and Oasis, Coast and Warehouse add up to a large number of concessions.
But whoever wins the auction, a large number of stores closures is expected as the new owner focuses on the most profitable sites at a time when fashion retail is increasingly migrating online.
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