Who are the ‘serious people’ making a play for Brown Thomas and Arnotts?

The future of Brown Thomas and Arnotts may soon lie in the hands of Vittorio Radice, a legendary retailing alchemist with an eye for the dramatic. As the sector reels from the effects of the pandemic, what sort of elixir might the Italian cook up for Dublin's two most prestigious department stores?

Radice is central to a buyout bid by his employers, Thailand's Central Group, for the Selfridges chain that owns the two Irish stores, as well as its eponymous London flagship and also De Bijenkorf, a high-end department store operator in the Netherlands.

The Italian’s reputation was built while running Selfridges for seven years until 2003 – before it owned the Irish outlets. He shook it from a fusty torpor and transformed it into a vibrant emporium using innovative design and marketing.

Selfridges group was put up for sale this summer for £4 billion (€4.65 billion) by the Weston family who first invested in Brown Thomas in the 1970s, and who bought Arnotts in 2015. Other interested parties are said to include Qatar Holdings and Hong Kong retail group Lane Crawford. But a deal with Central is expected to be sealed in the coming weeks as the billionaire Chirathivat family expands its retail interests, which already include luxury European department stores in Denmark, Switzerland, Italy and Germany.

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'He is the most inspirational person I ever worked with. We used to joke with him that he was a frustrated architect, the way he used to transform spaces'

The flamboyant Radice, who has run Central's La Rinascente chain in Italy since 2006 and also oversees the Thai group's European retail assets, is poised to become the star of the show. The scene surely is also set for some change at Brown Thomas and Arnotts, as the Chirathivats' empire stretches to Dublin.

David Riddiford, an Oxford-educated former lawyer, has a broad perspective on the transaction. He is a former chief executive of Arnotts, running it for four years until 2010 when its €1 billion plan to develop a retailing Northern Quarter in Dublin floundered on the rocks of the property and financial crash. Prior to this, he also worked for Radice for five years as his buying and merchandising director at Selfridges. Riddiford still speaks in awe of his old boss.

“He is the most inspirational person I ever worked with,” he says. “He is an impresario in retail. We used to joke with him that he was a frustrated architect, the way he used to transform spaces. But he would say that if you created a strong enough retail destination, you could sell anything there – it could be clothes, it could be insurance. He created retail theatre. I had never worked for anyone like that before.”

Leaving his mark

Radice’s flourishes at Selfridges included staging huge annual events with themes such as Bollywood or, one year, “Bodycraze”, which included a huge photographic project comprising hundreds of nude models outside the London store. Customers flocked in.

Time has moved on and the tricks that worked two decades ago may not work now in the era of online shopping and pandemic-ravaged city centres. But Radice, assuming he gains significant influence, is still likely to leave his mark on all the stores.

“If Vittorio is coming, the people working in the stores in Ireland should be looking forward to it. I think it would be a wonderful thing for Brown Thomas and Arnotts,” said Riddiford.

The wheels were put in motion on a prospective sale just weeks after the death in late April of Galen Weston, the company patriarch and Canadian billionaire married to former Irish model Hilary Weston (formerly Frayne). In June, a mystery bidder approached the family seeking to buy Selfridges. That month, the family appointed Credit Suisse to run a sale process, seeking offers of £4 billion.

The Westons put the Selfridges group up for sale as a single entity, excluding their Holt Renfrew store in Canada, which the family will retain. The deal will include four Selfridges outlets – the London flagship, two in Manchester and one in a futuristic building in Birmingham – plus seven De Bijenkorf shops and the Irish stores. These include Arnotts on Henry Street, the Brown Thomas flagship on Grafton Street, plus its stores in Cork, Galway and Limerick and two BT2 stores in suburban Dublin.

Combined, Arnotts and Brown Thomas contributed about €265 million of the Selfridges group’s near €2.3 billion sales in the 12 months before the pandemic hit in February 2020, or 11.5 per cent. Sales last year were badly affected by Ireland’s interminable lockdowns but, by all accounts, the stores have traded near pre-pandemic levels whenever they have been allowed to reopen unencumbered by restrictions.

However, the medium-term trajectory for the stores may yet be affected by the duration of the pandemic, the extent of the restoration of city centre footfall in the work-from-home era, and the revival of international tourism: Brown Thomas, for example, was a favourite of wealthy US and Chinese visitors.

The Selfridges sale process that began in June accelerated significantly in late autumn. It appears the Qataris, in particular, were never that enthusiastic about buying the Irish stores. There are conflicting accounts among people with insights into the process about whether and when they actually travelled to Dublin to view Brown Thomas and Arnotts. But it seems incongruous to suggest anyone would bid on assets without first visiting them.

Hyman says he 'knows the Westons a little bit' and insists they care deeply about the business and would not sell the stores to 'just anybody'

Most sources agree that the Qataris, initially touted as hot favourites to buy the group, ultimately were far more interested in just the British trophy assets. Qatar Holdings already owns the iconic Harrods, the largest department store in Europe.

Yet the Westons, including daughter Alannah, who chairs Selfridges, and son Galen jnr, who runs the family's Canadian holding company, seem determined to sell it as an integrated group without carving off the Irish assets, as some were speculating in late summer could happen. The family's links to Ireland are inextricable and long-standing. Both of Galen Weston's children who are now overseeing the sale were born in Dublin before the family moved back to Canada in the 1970s. Alannah and her mother, Hilary, still sit on the board of the Brown Thomas Arnotts (BTA) intermediate holding company.

Reliable custodians

The suggestion from insiders is that that the Westons have selected the Chirathivats as buyers in part because they view them as reliable custodians of the department stores that were assembled by the late Galen Weston. But, in the midst of a pandemic that has turned retail upside down, that still leaves the question as to why would they choose now as a time to sell?

"Everything has its price," says Richard Hyman, a British analyst and retail expert. A summer report in the Guardian newspaper said industry figures had surmised that Alannah Weston and Galen Weston jnr did not have the "conviction" to carry on running the group after the death of their father.

Hyman says he “knows the Westons a little bit” and insists they care deeply about the business and would not sell the stores to “just anybody”. When the sale process was initially announced, many assumed they would be acquired by a Middle Eastern buyer accumulating yet another trophy asset.

“This has been an emotional investment for the Westons. To sell it as a trophy asset would be to suggest that the buyer is only interested in owning it, and might not care as much about the underlying business. That won’t be the way with this buyer [Central Group]. They are serious people.”

Hyman says the group is being sold in good condition and is well invested. Despite Radice’s reputation for theatrics, he would be “surprised to see anything changing radically at all”. He also suggests that if the Irish stores were being sold on a stand-alone basis, it is likely that Central Group may not have looked at them at all. But being marketed as part of a wider group may be what has brought Arnotts and Brown Thomas into the orbit of the Chirathivats. What are they actually buying in Ireland?

Brown Thomas has been carefully cultivated by the Westons as Ireland’s premier luxury shopping outlet over many years. In recent years, however, it has not been allowed to stand still. Before the pandemic, a revamp of its ground floor cosmetics department and luxury brands hall was implemented.

Next year, further top brands, such as Louis Vuitton and Dior, are set to open in its Grafton Street flagship. It is also investing €10 million in a new outlet which is due to open in February in Dundrum Town Centre, occupying two floors of the old House of Fraser outlet. The Dundrum BT2 will close once the new outlet, which will have a heavy focus on a "sustainability" theme, opens.

Meanwhile, Arnotts, which operates closer to the mid-upper range of the market, has also been steadily improved by the Westons in their more than six years of ownership. It was starved of investment in previous years, when it was under the control of a consortium of lenders following the crash. Within three years of acquiring it, the Westons and Selfridges had committed €15 million for technology and store upgrades. Some higher-end brands were also attracted, using the Selfridges group’s pulling power.

The technology systems for both stores were totally overhauled as part of a process to attract so-called “omnichannel” shoppers, who mix browsing and buying online and in-person. The strategy benefited the stores handsomely during lockdowns, when they were able to cope with a huge spike in online sales to give themselves some sustenance. The Arnotts dining areas have also been targeted for upgrades. Overall, both stores are in the midst of an investment programme said to be worth €70 million.

Streamlining moves

Behind the scenes, Donald McDonald, the chief executive of BTA, has implemented a streamlining of senior management and administrative functions at Brown Thomas and Arnotts, integrating them to cut costs. When the Central Group gains control, it would not find it straightforward to separate the stores if, for example, it ever wanted to flog one of them off to reduce debt.

Eddie Shanahan, a retail, craft and fashion consultant who was once marketing manager of Arnotts, was among those who identified Central Group as a likely bidder early in the summer, as the process was beginning. He says an international buyer will encounter in Arnotts and Brown Thomas stores that have "upped their game considerably" in recent years, albeit at different levels of the market – BT at the higher-end and Arnotts at a more affordable price point.

“The question is: how do you layer them in the Dublin market? How will they complement each other, without simply turning Arnotts into BT North? They have a good management team at BTA that has done this very well. The stores’ events are good. They have a good calibre of buyer. I think they are ready for this [the expected takeover by Central Group and its European head, Radice],” says Shanahan.

What seems guaranteed is that the Central Group is likely to invest in the stores, rather than squeeze or 'sweat' them

Central Group is a conglomerate with interests across many sectors. It has 3,700 retail outlets worldwide, most of which are housed in the Thai listed company Central Retail. This subsidiary told the Thai stock market last week that it was not involved in any transaction for Selfridges. But multiple sources say the family and the group are definitely involved.

Shanahan suggests they could be bidding with a European property partner. Central owns the Globus group in Switzerland and the famous KaDeWe department store chain in Germany in conjunction with Austrian tycoon René Beko's Signa property group.

Property play

Brown Thomas, at less than half the size of Arnotts' near 300,000 sq ft footprint, would be a fairly small outlet in Central's portfolio, similar in size to its upscale Illum outlet in Copenhagen or some of the newer La Rinascente outlets in Italy. Arnotts operates slightly lower down the market than Brown Thomas and some of Central's other European stores, but its size will always make it relevant – it is in the top four department stores in the UK and Ireland in terms of footprint (or the top three once the House of Fraser in Kendal Milne in Manchester is shut for redevelopment).

There have been suggestions that there might be a property play in the Irish outlets, and that any new buyer might look to squeeze more from the trading assets. A revival of the Northern Quarter scheme would seem to be off the cards for Arnotts, while it would be difficult for Brown Thomas to do anything more with its footprint, hemmed in on Grafton Street. Kevin Sweeney, director of retail at Savills, suggested any new owner such as Central may look, however, to make Arnotts more "efficient" – to slim down the store slightly as sales move online, opening up parts of the business for other uses.

What seems guaranteed, however, is that the Central Group is likely to invest in the stores, rather than squeeze or “sweat” them. This desire to invest and upgrade in its European department store assets has become apparent in every transaction it has completed here over the past decade – at La Rinascente, KaDeWe, Illum and, most recently, Globus, whose stores are being lined up for upgrade with Signa.

The coming influence of Radice, too, is likely to ensure that Brown Thomas and Arnotts will not be allowed to decline.

Riddiford sees one major difference between the investment approach of the Westons and that favoured by his old boss. The Italian, he says, is less concerned about upscale brands “per se”, but is more interested in co-locating such brands with edgier offerings to draw in a wider range of customers.

“He likes to mix it up and make it more democratic,” says Riddiford. And, of course, he loves creating “theatre”. The next chapter for Dublin’s department store stalwarts may be an interesting one.