Mar 22, 2020
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Cath Kidston seeks urgent buyer as Covid-19 bites - report

Mar 22, 2020

Cath Kidston needs to find a buyer urgently, a news report said at the weekend. The company is believed to have called in Alvarez & Marsal (A&M) to conduct an urgent review of its options and ask for fast bids.

Cath Kidston

Sky News said it had learnt that prospective bidders have been notified that offers are needed imminently as current trading proves weaker than ever. The company usually gets around 40% of its revenue from tourists and its international business, with a strong weighting to Asia, and sales are believed to have plummeted.

"Cath Kidston has been actively implementing a new business strategy to support the growth of the brand while managing the many pressures in the retail sector," a spokesman told Sky. "This includes dealing with the outbreak of Covid-19, which has been impacting the business globally since the beginning of the year. We have therefore initiated a process to explore options for the business, to enable the management team to continue implementing their strategy to deliver growth."

The 27-year-old company has around 60 UK stores, including its four-year-old Piccadilly, London flagship, and employs around 800 people. It has over 200 stores globally. 

Best known for its colourful floral prints that are influenced by vintage designs, the brand has had its ups and downs in recent years. It has been loss-making, despite seeing its sales rising both in the UK market and abroad.

The company’s founder Cath Kidston sold control of the firm to private equity specialist TA Associates a decade ago in a deal believed to value it at £100 million at the time. However, its current value is likely to be far less than that.

Baring Private Equity Asia took a stake in it in 2014 and became the majority shareholder in 2016, seeing huge opportunity for the brand in the Asian market.

And it has expanded in that region, as well as growing its digital ops (it appointed a digital director from Victoria Beckham last year), and opening pop-ups in markets like Canada.

But its problems have been exacerbated by the coronavirus outbreak, which has impacted Asian markets in a big way and which is now also responsible for swathes of store closures in the UK, Europe and North America.

The company hasn’t issued an earnings report recently. But Sky said that bidders have been told it’s lost over £27 million in the last two financial years and and that the nine months to last December also saw an EBITDA loss of £11 million.

It’s unclear what other options apart from a sale are being considered at present and whether a pre-pack administration filing might happen. 

But there’s a chance the brand can survive, albeit with new owners and possibly fewer stores (for now). A turnaround strategy headed by ex-Coach exec Melinda Paraie, who joined as CEO in 2018, has reportedly seen the business showing signs of improvement and it's likely to be in demand by private equity firms looking to the post-coronavirus future. The question is whether they would want to buy it as a going concern or wait for an administration filing that could free them from problem store leases.  

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