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Foreign retailers increasingly eying up UK market

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A wave of new foreign invaders has been crashing down on the beaches of the UK, with some big young US brands most prominent amid the surf.

The two huge units Forever 21 has opened at the Bullring in Birmingham and Westfield’s new cathedral of commerce in Stratford, as well as its renting of the ex-HMV store on London’s Oxford Street, show its ambitions in the UK, whilst Hollister has been equally confident in its recent lettings.

US-based retailers have long seen the UK as fertile ground for growing their business overseas, thanks to language, culture and employment law similarities, but in this new globalised world the UK borders are increasingly being breached by more unlikely marauders.

In the last few months Italian shoe specialists Carlo Pazolini, Portuguese fashion brand Sacoor Brothers, and the Spanish shoe & accessories retailer Coolway all opened their first stores in the country.

Japanese traders Uniqlo and Silas, which originated in the UK, returned to these shores recently, and over the last year Danish jewellery retailer Pandora has been building a store portfolio right across Britain.

On the face of it, a trend for global firms to invest in the UK seems bizarre when many domestic retailers are closing stores and struggling for sales but for every prime unit vacated by a struggling UK retailer there is a thriving international business ready to take its place.

Gareth Iley, Consumer and Retail Specialist at Clearwater Corporate Finance, argues that it is much easier than a decade ago to expand globally and that the weak market conditions in the UK at present are seen by growing firms as supplying an ideal opportunity to invest for the future.

“Up until fairly recently retail was more geographic specific, with many companies that tried to expand internationally, such as Marks & Spencer, finding that it did not work out,” Iley explained.

“Now brands are increasingly international by nature and are recognised as such, so it doesn’t matter where you are trading in the world.”

Iley regularly deals with mergers & acquisitions by large international corporates looking to buy into the UK and he argues now is a good time to make an acquisition in the UK.

A spate of takeovers of footwear businesses show how attractive well-run UK traders can be, with Kurt Geiger, Schuh and Jones the Bootmaker, falling into the hands of US-based firms Jones Group and Genesco, and Dutch corporate Macintosh respectively.

The number of takeovers, particularly by private equity firms, has been growing of late, with those companies which thrived during the recent spending drought appearing to have reached critical mass most ripe for the picking.

“Looking at the three footwear deals that were done in the UK recently, Jones, Schu and Kurt Geiger, all of those businesses traded very strongly over the last 18 months to two years before they were sold,” said Iley.

“A corporate appraisal on those businesses will tell potential buyers that if they have performed that well during a downturn they must be good companies.

“These were not cheap acquisitions but they were safer acquisitions because it was easier to see how these businesses can still trade strongly in a poor market.”

Other UK retailers are being swallowed up because of their specialist expertise, such as The Book Depository which was recently bought by Amazon because, as Iley explains, the US giant wanted to acquire its capabilities to deliver out-of-print books to people anywhere in the world in 48 hours.

Over the next year or so Iley expects these type of deals to increase, particularly with US rivals picking UK companies.

Iley said: “A number of UK retail assets are now owned by private equity funds which are American or have their origins in America, such as Walburg Pincus, KKR, TPG Capital, and that puts those businesses on the radar of US corporates.”

Jones The Bootmaker has recently been acquired by Dutch corporate Macintosh
Jones The Bootmaker has recently been acquired by Dutch corporate Macintosh

Many expected rising Asian economies to be looking to acquire more UK or other western assets over the last few years, but with such a huge energy demand at home, a country like China has been more interested in the natural resources of South America and Africa.

Chinese companies have preferred to discreetly buy up other businesses and assets around the world rather than impress its brands on other cultures.

A notable exception to this trend has been the Chinese fashion brand Bosideng, famous for its goose-down jackets, which announced in July that it is to open a flagship store in central London.

This crumbling of international barriers should be embraced according to Iley, with foreign businesses and owners able to pump money into this country.

“In a global world this is healthy for the UK economy because it shows that this country is a good place to do business. Investment will follow creating more jobs,” concluded Iley.

“There’s masses of potential for UK retailers to get their act together and take opportunities overseas themselves.”

Published on Tuesday 25 October by Editorial Assistant

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