A chill fell on the high street in more ways than one this week. As the big freeze bit, Icelandic investor Baugur filed for its home country’s equivalent of Chapter 11 bankruptcy protection.
Baugur landed on our shores all guns blazing just short of a decade ago and snapped up a massive chunk of the high street. With its gung-ho attitude, many retail observers have wondered not why it is in trouble, but why it took so long to get to this point.
The picture is far from clear about what happens next. The chains backed by Baugur are still open, but it’s almost inconceivable that they can carry on in their existing forms.
Baugur’s assets will be controlled by its creditors and they will decide whether or not to retain them. One thing that is clear is that everyone from Sir Philip Green to private equity groups will be eyeing up Baugur’s portfolio in search of a bargain.
Baugur’s investments – ranging from House of Fraser to Debenhams, Hamleys to Iceland, Oasis to Goldsmiths – differ hugely and outcomes are likely to be similarly diverse. The likelihood is that strong retailers such as Iceland will emerge pretty much unscathed and founder Malcolm Walker will welcome the chance to take full control of his business once again.
There will probably be a bun fight for Hamleys. The iconic toy brand has strength both in the UK and overseas, and it is thought that Middle Eastern investors are counting their cash and considering a move.
As for Mosaic, if someone were to take control of the group they would own swathes of the high street, but its strong brands could be sold piecemeal.
While critics frequently said Baugur was a house of cards waiting to fall, its collapse has wider implications for the retail industry. The fallout could well affect good retail businesses as it will potentially unnerve credit insurers further.
The high street is an increasingly precarious place and the Baugur rollercoaster has proved that even fundamentally solid retailers can be destabilised simply by their ownership structure and financial whizz-kiddery.
It goes to show that while retailers have been led by those with pound signs flashing in their eyes, what we now really need is a return to good old-fashioned shopkeeping.
Jennifer Creevy is news editor of Retail Week.