Changing family fortunes put Selfridges in the shop window

Facing a volatile and uncertain outlook, the Weston family has kicked off a sale of Selfridges, hoping to fetch £4 billion. The move was apparently prompted by an approach to Pavi Binning, a long-term family associate who acts as an adviser. The interested party is rumoured to be a North American retailer.

Few in the retail industry expected co-owners Galen Jr and Alannah Weston to sever ties with a business so close to the heart of their father Galen Sr, who died in April after a long illness. Their willingness to do so suggests they may not have the stomach for the long and arduous road to recovery after the pandemic derailed years of stellar performance.

The sale will give an indication of just how confident, or not, investors are feeling about the future of prime department stores — and the capital’s retail prospects.

Galen Weston had a taste for luxury and a penchant for trophy assets. In the 1980s, he bought department store chains Holt Renfrew in Canada and Brown Thomas in Ireland, and took them upmarket. “Galen would often come [in] ... and chat to the staff, asking them what they thought about this or that. He was a real gentleman and a great merchant,” said former Holt Renfrew boss Andrew Jennings.

‘They wouldn’t do this while Galen [far right] was alive,’ but the Weston family are ready to move on

CORBIS

Long before that, Harry Gordon Selfridge had opened the doors of his Oxford Street store in 1909. He strived to make shopping a pleasure instead of a necessity by staging performances, opening in-store restaurants and commissioning lavish window displays.

After making a number of unsuccessful approaches for Selfridges, which he had long coveted, Galen Sr got a golden chance in 2003 when retail entrepreneur Tom Hunter teamed up with high street tycoon Philip Green for a raid on Selfridges, then a public company. The auction drew colourful characters including property tycoons Robert and Vincent Tchenguiz and, most bizarrely, Bernie Ecclestone, backed by Lehman Brothers. One source close to the action quipped that the only discernible reason for the former Formula One boss’s involvement was that his wife liked to shop there. Galen Sr’s £598 million bid was enough to see off the competition, amid allegations of dirty tricks from rival bidders.

Alannah Weston, who straddled high society and London’s art scene, was soon installed as Selfridges’ creative director at the age of 31. Under Alannah, Selfridges hosted a city made of biscuits created by Chinese artist Song Dong. Damien Hirst’s sculpture of a crystal-encrusted flying horse now hangs in the Brasserie of Light.

The Westons poured money into Selfridges’ Oxford Street flagship, aiming to turn each part of the store into a destination. In 2007, Stevie Wonder performed at the opening of a new jewellery hall called The Wonder Room. Three years later Selfridges opened The Shoe Galleries, featuring boutiques selling over 100,000 pairs of shoes. One source working on a big refurbishment recalled asking Galen what sort of budget they should work towards — and being told: “This is not about money. This is a legacy.”

Luxury retail consultant Said Chaarawi, who used to work in the Wonder Room, said the Westons shrewdly capitalised on the Qataris’ purchase of Harrods in 2010, which deterred shoppers from Saudi Arabia, the UAE and Kuwait. “They were the biggest spenders in Harrods so Selfridges brought in the brands they wanted, like Chanel and Prada. It gave those customers an alternative,” he said.

Since 2003 Selfridges’ profits have more than doubled to £81 million and sales have risen by 92 per cent to £853 million. The Westons have extracted £580 million in dividends over the past 11 years.

Alannah became chairman two years ago, alongside luxury retail veteran Anne Pitcher, group managing director. After Galen Sr died, Alannah and Galen Jr were left in control of Selfridges, Holt Renfrew, Brown Thomas, Dublin-based department store Arnotts and de Bijenkorf in the Netherlands. In the year to February 2020, the group reported operating profits of £135 million on sales of £1.5 billion.

Alannah and Galen, born nine months apart, are said to enjoy a close relationship. While sources close to the company insist the mystery approach for Selfridges catalysed the sale process, few believe it would have got Galen Sr’s blessing.

“Covid has made it a lot harder than they would like it to be. It will take the best part of two to three years to clamber back up,” said a source who knows the Westons well. “They wouldn’t do this [sell the business] while Galen was alive, but now they’re in control. Alannah has a lot of other interests in life.”

As private owners sitting on a family fortune that The Sunday Times Rich List calculates at £11 billion, the Westons do not need to sell to the highest bidder. They are seeking a suitor they can trust to honour Selfridges’ commitment to innovation and retail excellence. Alannah is thought to want assurances that the new owner will prioritise sustainability, too.

Those red lines would seem to rule out many private equity firms drawn by the prospect of carrying out a sale and leaseback on the roughly £2 billion worth of real estate included in the sale, which includes the London flagship and several surrounding buildings that could be redeveloped or sold off entirely.

Trade buyers or sovereign wealth funds are seen as more likely. Hong Kong billionaire Peter Woo, owner of the Lane Crawford department store chain, and Thailand’s Central Group conglomerate, which owns an upmarket department store chain, are seen as potential suitors. Sovereign wealth funds including the Qatar Investment Authority, which already owns Harrods, as well as those from Abu Dhabi and Saudi Arabia, all have the financial firepower and appetite to invest in Britain. The sale process is being run by Robin Rankin, a senior banker at Credit Suisse in New York.

As well as the UK business, which also operates three stores in Manchester and Birmingham, the sale includes all the group's assets aside from Holt Renfrew. Investor memorandums, which will be issued this week, are expected to be split into four sections detailing the overall group, the Selfridges retail business, Brown Thomas and Arnotts in Ireland and de Bijenkorf. Potential buyers will be able to analyse each store’s performance, online growth and details of the properties.

One of the few criticisms levelled at the Westons is that they were slow to invest in Selfridges’ online business, which left them ill prepared to deal with the lockdowns. One senior banker said some of the interested bidders saw an opportunity to invest heavily in the online side before selling the company on at a valuation multiple nearer to those enjoyed by online retailers. Still, the next owner of Selfridges will find it impossible to bring the flair for which the retailer is known to the digital world, where logistical prowess and cheap prices tend to win the day.

Last year, Selfridges was hammered by the government’s work-from-home guidance and the absence of tourists. Ministers then unexpectedly twisted the knife by scrapping the EU’s tax-free shopping scheme for tourists at the end of last year.

However, Selfridges can’t be written off just yet. “The Westons have put in huge amounts of money to make it successful,” said retail expert Richard Hyman. “It’s a special store.”

From Primark to Fortnum & Mason

A sale of Selfridges would not mark the end of the Weston family’s high street presence — far from it.

The Westons’ business interests — spanning supermarkets, bakeries and department stores — are held across two branches of the reclusive family. In one, Galen Weston’s children Alannah and Galen Jr run the Selfridges Group and Canadian supermarket Loblaws, respectively.

The family’s other interests are controlled by the descendants of Garry Weston, late brother of Galen Sr. George Weston is boss of AB Foods, a £16 billion conglomerate that owns everything from fast-fashion retailer Primark to Twinings tea and a huge sugar business.

His brother Guy chairs Wittington Investments, the holding company that owns the family’s majority stake in AB Foods as well as the posh department store chain Fortnum & Mason and the furniture retailer Heal’s. Kate Hobhouse, their sister, chairs Fortnum & Mason.

The Westons’ business empire can be traced back 137 years to a bakery opened by George Weston in Toronto. Now, members of the family own 20.8 per cent of Wittington, the rest owned by their charitable trust, the Garfield Weston Foundation, which has donated over £1 billion since its inception in 1958.