Baugur brands have a future

“Is Baugur the new Sears?” a Retail Week feature asked in February. The article produced a furious response from the Icelandic investor, but in retrospect it looks if anything a little unfair on the memory of Sears.

Whether it was Jón sgeir Jóhannesson pleading for help on Icelandic TV, Sir Philip Green jetting into Reykjavik with a rescue package, or vociferous denials that an administrator had been lined up, the Baugur saga became even more chaotic and bizarre this week. The confused and contradictory messages coming out of it betray an organisation in meltdown and it’s certain it won’t exist for much longer in its present form.

This week it’s been remarkable how retailers that for years have been proud to be portrayed as part of the Baugur empire are now saying they can carry on independently of the investment company. There’s probably a big element of hope in what they’re saying, but their volte-face is understandable as the uncertainty is casting a huge shadow.
The complexity of the investments and the uncertainty over where Baugur’s stakes will end up make predictions almost worthless.

However, inevitably there will be fallout and there will be casualties among the weaker parts of the Icelandic web, with Whittard looking especially vulnerable. This is a hugely worrying time for the thousands of people who work in the retailers affected.

At the time of going to press, the chances of a deal whereby Green would effectively take control of Baugur were hanging in the balance. As the deal-junkie he is, Green has spotted an opportunity to do a quick deal on the cheap, but it’s not one he needs to do.

But most of the businesses Baugur backs are strong brands and whether it’s Green or someone else, the opportunity to pick up stakes or debt cheaply will be taken up by shrewd bottom-fishing investors and these companies will survive in some form.

Historians of retail will look back on the Icelandic era of retail investment as one of the odder episodes in the annals of the sector. It is now all but over, but retailing will go on, and be a rather more rational place for it.