Suitors Circling Selfridges Test Future of Post-Pandemic Retail

More than a year into the pandemic that’s dramatically changed consumer habits, one of the most prized retail assets in the U.K. is potentially coming up for sale, testing the appetite for physical outlets in an era of online shopping.

Selfridges & Co. Ltd., the luxury emporium best known for its giant department store on London’s Oxford Street, may be on the block with a 4 billion pound ($5.64 billion) price tag following an unsolicited approach, according to people familiar with the discussion. The current owner, the Canadian Weston family, has hired Credit Suisse to advise on the overture from an unidentified buyer, said the people, who asked not to be named because the deliberations aren’t yet public.

The department store is among the most famous in the world, eclipsed in London only by Harrods. While other brands have struggled or closed down entirely, Selfridges was able to withstand the downturn in recent years with its blend of cutting-edge fashion and a broad range — the shoe department is among the largest in the world and the rooftop terrace is a popular gourmet destination. A considerable part of the asset’s value lies in the real estate, which spans a large section of Oxford Street, London’s most popular shopping mile.

But the Weston clan also prides itself in its longterm approach to investments. Since gaining control of Selfridges 18 years ago, the family has invested heavily in the store. The store has outlets in Manchester and Birmingham, where Selfridges occupies a windowless space-age building vaguely reminiscent of a giant silver slug. Besides, the timing of a sale may not be ideal, said Peter Williams, the former chief executive officer of Selfridges who ran the business before the sale to the Westons.

“Oxford Street and Central London will be the last to recover from Covid because of the lack of tourists so why would you sell it now?” Williams said. “If I was in their shoes I would bat away any approach quickly as it can be a distraction and doesn’t help the running of the business. Particularly right now when everyone is working so hard to bring physical retail back to life.”

Spokesmen for Selfridges and Credit Suisse both declined to comment on the potential sale.

Expansion Drive

Founded in 1908 by Harry Gordon Selfridge, the retailer came under control of Canadian businessman Galen Weston in 2003 for almost 600 million pounds. The group has since expanded to other department store chains, including Arnotts and Brown Thomas in Ireland, Holt Renfrew in Canada and de Bijenkorf in the Netherlands. The holdings outside the U.K. and Ireland wouldn’t be included in the proposed sale, the people said.

Assessing the value of the real estate will be

Photographer: Stuart C. Wilson/Getty Images

a key part of any possible sale. A chance to own the 540,000 square foot (50,168 square meters) Beaux Arts store on Oxford Street is an attractive proposition. But it’s also become a location increasingly surrounded by vacant neighbors. Rival department stores on the U.K.’s busiest shopping street including Debenhams and House of Fraser have closed, while John Lewis is pursuing plans to convert part of its store into offices.

About 9.4% of retail space in London’s West End is now vacant, causing rents for the best central London stores to plunge by about 14% in the year through March, according to research published by U.K. property agent Savills Plc. Oxford Street rents are down almost 18% in the period, the broker’s data show. That’s hit investor demand for stores in London’s tourist heartlands, with deals in the first quarter down by almost 46% from a year earlier.

Active Owners

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British military looks to the ‘Eurotank’ as it weighs its hardware options

LONDON and COLOGNE, Germany – The British Ministry of Defence has begun opening discussions with France and Germany about signing up as an observer on their next-generation Main Ground Combat System program, according to government and industry officials in the UK and Germany.

Details of exactly what access the British will get to the program remain unclear, as final details have yet to be fully agreed ahead of a possible pact signing later this year. “Observer status is being granted to the UK for the Franco-German Main Ground Combat System program,” an MoD official in London said.

An industry team involving Krauss Maffei Wegmann, Nexter and Rheinmetall are already in the early conceptual stages of pulling together a vehicle design to replace the German Leopard 2 and the French Leclerc around 2035.

A KMW spokesman told Defense News that the company is aware of ongoing talks aimed at making Britain an observer, but he referred additional questions to the defense ministry in Berlin.

For the British, the link is expected to help inform future capability requirements developed by the government’s Defence Science and Technology Laboratory and others as part of the MoD’s Future Ground Combat System program.

That program is considering a series of options to replace the current capabilities in the mounted, close-combat arena from 2040 onwards.

The Franco-German tank is not the only program being eyed by the MoD, which continues to monitor a number of global programs and developers, British officials said.

The German defense ministry was tight-lipped on specifics regarding London’s involvement, though a spokeswoman stressed the project’s international thrust.

“The MGCS project was created with a European approach in mind, open for other nations to participate,” the spokeswoman told Defense News. An observer status would precede a more formal role for cooperation with new candidate countries, she added.

“Bringing new members on board with MCGS is in line with Germany’s aspirations to push consolidation in the European defense industry,” the spokeswoman wrote in an email.

The British interest in MGCS, depending on how far it progresses, has all the markings of a test case for pursuing large-scale, joint programs in a post-Brexit Europe. Military and government leaders in on both sides have vowed to leave defense cooperation unscathed after the laborious divorce proceedings ending the UK’s membership in the European Union. Still, London is formally an outside party in a defense-cooperation regime engineered through Brussels.

The way ahead for the British in a broader ground-warfare context might become clearer if the government goes ahead with a dedicated land equipment industrial strategy as part of the defense and security industrial strategy review.

A land strategy, to go alongside already complete maritime and air reviews, is being considered but a final decision is still outstanding.

The fact British are keeping tabs on the European tank project is a step in the right direction for those who believe the battlefield behemoths still have a future in the British Army.

It didn’t seem that way last August when national media in the UK were reporting the MoD was thinking of scrapping the service’s 227 Challenger 2 tanks as it considered how to afford a pivot to more pressing future requirements in areas like cyber, space and unmanned vehicles.

Defense Secretary Ben Wallace finally ended the speculation in September when he denied the Challenger 2 force was to be mothballed. He didn’t say, however, how many tanks the British would update.

Lethality and protection upgrades to the Challenger, assuming they are approved, will be led by RBSL, the British-based Rheinmetall/BAE Systems joint venture. It includes the installation of a new turret with a 120 mm smoothbore gun replacing the rifled cannon currently installed on the vehicle.

A decision on the program approval is imminent, with the business case for the life extension program (LEP) delivered to the MoD approvals body late last year. The idea is to make the vehicles last through 2035 or even 2040.

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Vaccine rally stalls and data in focus

LONDON — European stocks were muted on Wednesday morning as a global market rally falters following a spate of positive coronavirus vaccine news.

The pan-European Stoxx 600 inched 0.2% lower in early trade with industrials shedding 0.6% to lead losses while retail stocks added 0.2%.

The stall in global markets began on Tuesday, with European stocks closing lower despite the backdrop of more positive coronavirus vaccine news from Moderna, which announced on Monday that preliminary data showed its coronavirus vaccine was more than 94% effective at preventing Covid-19. That news had come after Pfizer and BioNTech’s vaccine candidate was found to be more than 90% effective.

Elsewhere, U.S. stock futures retreated Wednesday morning as investors digested the recent record rally in equities. Futures for the S&P 500 and Nasdaq-100 also edged down marginally.

Dampened sentiment comes as U.S. retail sales came in lower than expected for October as millions of Americans lost their unemployment benefits amid the surge in coronavirus cases. The U.S. 7-day average of daily new Covid-19 infections surpassed 150,000 for the first time on Monday, according to a CNBC analysis of Johns Hopkins data.

Meanwhile, Asia-Pacific markets were mixed in Wednesday trade as investors remain cautious as coronavirus cases continued to surge. Data from Japan showed exports did much better than expected in October, falling 0.2%, according to the Ministry of Finance. That’s compared to a 4.5% decline forecast by economists in a Reuters poll. It followed a 4.9% drop in September.

Exports were helped by a rise in demand for Japanese cars by China and the U.S., which drove up shipments, according to Reuters.

Maersk, the world’s largest container shipping firm, matched third-quarter profit expectations on Wednesday amid a stronger-than-expected pickup in demand. The company’s shares edged 1.2% lower in early trade.

There were no major share price moves early in the session, with Swedish heating technology firm Nibe Industrier adding 4.3% to lead gains on the back of a rise in operating profit, while British investment platform Hargreaves Lansdown fell 3.7%.

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– CNBC’s Weizhen Tan and Maggie Fitzgerald contributed to this market report.

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