Comment: Hamleys deal opens the door to overseas growth

This week’s acquisition of Hamleys, which famously describes itself as the “finest toy shop in the world”, paves the way for the retailer to test that claim on a truly global scale.

Buyer Ludendo is believed to have paid close to £60m for the business, which was 65% owned by Landsbanki, the nationalised Icelandic bank. Having eyed Hamleys for three years, the French group’s general manager, Rudolph Hidalgo, has already sketched out his vision to expand the British brand into Asia and South America.

In Ludendo, Hamleys has found an owner that not only understands its market but has the chance to leverage its own portfolio of 300 stores worldwide to help further build the UK brand abroad and online.

The acquisition has the potential to play a key role in Ludendo’s strategy to double its store portfolio over the next four years. On top of an already burgeoning franchise business overseas, with stores in Russia, the Middle East, Cyprus, India and Denmark, the 250-year-old Regent Street retailer is a key destination for tourists.

From upscale Burberry to more mainstream names such as Waitrose and Topshop, iconic British retail brands are proving themselves popular travellers. But while Hamleys’ heritage provides it with similar potential, it will face some unique challenges as well.

There is a temptation to imagine that the toy retailer’s positioning in the UK can be easily transferred abroad. But, as in the UK, keen focus on price globally and high levels of competition, exacerbated by generalists from Amazon to the supermarkets, makes organic expansion anything but child’s play.

Challenges in China

Alliance Boots’ £56m deal to take a 12% stake in one of China’s biggest pharmaceutical companies highlights owner Stefano Pessina’s global aspirations, and the attractiveness of the Chinese market for British companies.

But while the potential of China is well documented, there is a shadow over its short-term growth prospects. Burberry’s sales slowdown and Home Depot’s decision to quit the market offer circumstantial evidence of this.

But statistics from declining levels of imports to slipping profit margins at some of China’s big domestic companies give a more tangible indication that there may be challenges ahead in China that retailers should heed.