Baugur

COOL CUSTOMER

As corporate symbolism goes, the enormous statue of a Viking with a real Fender Stratocaster guitar on his back in the lobby of Baugur’s London headquarters is pretty striking. In less than two decades, the family-controlled group has grown from a single cut-price grocer in Reykjavik into a €15bn retail empire with stakes in 20 chains and almost 4,000 outlets across 35 countries.

Leading the hordes of bank-indulged Icelandic investors starved of domestic opportunities at the start of the decade’s credit boom, Baugur bought up huge chunks of the British high street, including toyshop Hamleys, fashion chains Karen Millen, Principles and Oasis, jeweller Goldsmiths and department store group House of Fraser. Baugur – abetted by consumers also intoxicated by low interest rates – triumphed at retaining management while turning around somewhat unloved businesses.

Today, however, a credit storm is swirling across Iceland’s financial landscape – banks, already exposed to the equivalent to 800% of the country’s GDP, are now being whipped by the high cost of insuring debt – and Baugur looks vulnerable in the face of a retail slump. Twice in the past 12 months it passed on the opportunity to buy struggling department store Debenhams, although in February it increased its stake to 11% and offered to increase its 30% stake in threadbare outfitter Moss Bros. Moreover, the company has resisted a muchanticipated assault on the US market. During the past seven months Baugur has notched up an 8.5% stake in upscale retailer Saks Fifth Avenue but has so far resisted the widely expected €2bn takeover.

This all seems uncharacteristically cautious for a company whose sense of adventure is so entrenched there is a racing car driving simulator in its London office. Yet as befits his former job as a banker, Baugur chief executive Gunnar Sigurdsson insists Baugur is a long-term investor, only interested in paying the right price for something.

“The businesses that we are involved with are well-funded. Each brand in our portfolio has loans secured on the cash-flow of the individual brand and not on Baugur,” Sigurdsson soothes, insisting that there is no urgency to repay loans. Baugur, he maintains, is still on target to become the world’s biggest retail group within five years. The US still towers in Baugur’s plans, although Sigurdsson notes that retail there is “going through difficult times”, as is the imminent leap into hard-tocrack Germany. He is also excited by the planned international rollout of some Baugur-nourished UK brands and by a bigger push into the neglected e-tail arena. “The entrepreneurial skills of Baugur’s owners have had a lot to do with our growth... as has the focus on quality retailing, which is what we know and understand best,” he says.