Selfridges’ 4 billion pound price tag is suitably rich for a luxury department store. Given the punchy valuation, it will probably appeal to investors who are more interested in owning a trophy asset than making a decent financial return.
The group’s owners, the Weston family, bought Selfridges for nearly 600 million pounds in 2003. Nearly 20 years later, the Canadian investors have received an approach from an unidentified buyer, according to press reports. They’ve now put it up for sale at nearly seven times their original purchase price. Assets include the Brown Thomas and Arnotts brands in Ireland, as well as luxury stores across Britain and the Netherlands. Its key selling point, however, is the central London Oxford Street store, where handbags fetch 3,500 pounds and the rooftop Dior restaurant is booked up until September.
That flagship location, which covers 600,000 square feet, is part of a vast property portfolio. Along with freeholds spread across Ireland, the UK and the Netherlands, the real estate could account for almost half the mooted price tag, according to a person familiar with the sale.
Still, a 4 billion pound valuation looks pricey. It’s nearly 5 times the company’s 852 million pounds of annual pre-pandemic sales. That compares with a 2.3 times trailing revenue multiple when private equity bidder bought rival Liberty in 2019. The Qatar Investment Authority bought Harrods for a 3.2 times multiple in 2010. The Westons may argue that the value of Selfridges’ property portfolio has gone up since the Harrods deal, as have wider stock-market multiples. But the retail industry has been pummelled, not least by the pandemic. Selfridges’ neighbour Debenhams collapsed into administration last year, and John Lewis has been shutting stores.
Selfridges’ cannot be immune to such a decline. The pandemic has accelerated a shift to online purchases, making it harder for so-called destination shops to justify high prices. Meanwhile London’s appeal as a tourist location has arguably lost ground after Britain’s exit from the European Union. Potential suitors, like a Middle Eastern sovereign wealth fund, may covet such an iconic trophy. But the numbers probably don’t stack up.