Selfridges’ £ 4 billion price tag is high enough for a luxury department store. Given the harsh valuation, it is likely to appeal to investors who are more interested in owning a trophy asset than making a decent financial return.
The owners of the group, the Weston family, bought Selfridges for nearly £ 600 million in 2003. Almost 20 years later, an unknown buyer approached Canadian investors, according to press reports. They have now put it up for sale at nearly seven times the original purchase price. Assets include the Brown Thomas and Arnotts brands in Ireland, as well as luxury stores in the UK and the Netherlands. Its main selling point, however, is the central London store on Oxford Street, where handbags can be purchased for £ 3,500 and the rooftop Dior restaurant is booked until September.
This 600,000 square foot flagship site is part of an extensive portfolio of properties. Along with freehold ownership in Ireland, the United Kingdom and the Netherlands, property could be worth almost half of the negotiated price, according to someone familiar with the sale.
However, the £ 4 billion valuation looks expensive. That’s nearly 5 times the company’s annual sales before the £ 852 million pandemic. This compares to the 2.3x interim revenue multiple when a private equity trader bought competitor Liberty in 2019. The Qatar Investment Authority bought Harrods 3.2 times in 2010. The Westons could argue that the value of Selfridges’ portfolio of properties has risen since the Harrods have broader multiples in the stock market. But the retail industry has been hit hard, not least by the pandemic. Selfridges’ neighbor Debenhams crashed last year and John Lewis closed stores.
Selfridges’ cannot be immune to such a decline. The pandemic has accelerated the transition to online shopping, making it harder for so-called specialty stores to justify high prices. Meanwhile, London’s appeal as a tourist destination may have lost popularity after the UK left the European Union. Potential aspirants like the Middle East Sovereign Wealth Fund may want to win such an iconic trophy. But the numbers probably don’t add up.
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– Owners of the UK department store Selfridges are considering a £ 4bn sale following a call from an unidentified buyer, React News reported June 10. The Financial Times and Times also reported a possible sale.
Selfridges’ Irish businesses, including Arnotts and Brown Thomas, are on the potential sale.
– The retailer is owned by the Canadian wing of the Weston family, who bought it in 2003 for £ 598 million.
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