AS Watson bids for The Perfume Shop
million offer for the Merchant Retail Group, a UK specialist
perfume retailer. The deal will see AS Watson, Hutchinson Whampoa's
retail division, take on one of the country's leading perfume
retailers further increasing its presence in the European market,
reports Simon Pitman.
Merchant Retail owns The Perfume Shop, a successful format in the UK fragrance sector. The business has grown successfully and consistently in the past five years - increasing in size from 55 to 114 stores that has allowed revenue to increase from £37.8 million to £105.80 million.
However, a fiercely competitive UK retail environment, coupled with the fact that pre-Christmas trading was challenging have been cited as reasons to sell the business to a multi-national with the resources to continue investing in the business.
"With the likelihood of an increasingly competitive market in the UK and challenging retail spending environment, developing the group further is most likely to succeed if undertaken by a larger international corporation," said Brian O'Callaghan, chairman of Merchant Retail Group.
AS Watson has the largest number of retail outlets of any health and beauty retailer in the world. Since 2000 it has had an active policy to expand into the European market. Last year the company expanded into the French market with the purchase of the Marionnaud perfumes and beauty chain.
The company said that the purchase of The Perfume Shop would compliment the Marrionnaud chain as it currently has no presence in the UK market.
Commenting on the offer, Ian Wade, group managing director of AS Watson, said: "The addition of Merchant Retail to our portfolio further expands our European footprint and strengthens our position as the largest retailer in the perfumery and cosmetics sector of the health and beauty market with more than 1,500 stores."
Merchant Retail has just announced its preliminary results for the 52 weeks ending 26 March 2005, indicating that that the company's revenues are still increasing, with sales turnover for its operations, including its departments stores, increasing 9 per cent to £193.7 million.
However, the fact that profits before tax only increased 2 per cent to £16.8 million, indicates the fiercely competitive nature of the UK retail environment at the moment, with heavy discounting prevailing.
