UK retail: who will be celebrating this Christmas?

The UK consumer sector continues to be popular with the asset class, with 2013 bringing home a clutch of high-profile deals including the acquisitions of Joules, Dr Martens and GHD. So who in the extremely seasonal sector will be celebrating by year-end?

Lion Capital kicked off proceedings when it acquired hair styling brand GHD from Montagu Private Equity for an estimated £300m in February. According to Amazon's site editors, GHD's Kiss Hot Pink IV hair straighteners will be topping wish lists for anyone seeking a quick fix for their unmanageable mane. GHD's dominance in the hair styling market explains the swathes of bidders vying for the company at the start of the year. Indeed, under Montagu's stewardship the company's profits more than doubled, and the sale rewarded the firm with a 3x return. 

Another Amazon editor favourite is Dr Martens, which was conveniently picked up by Permira in October for a cool £300m. The iconic footwear brand recorded a profit margin of 12% on sales in 2012, and thanks to Miley Cyrus's preference for cherry-red Docs, any uptick in sales over the festive season will surely bring some holiday cheer to Permira's investment team.

Turning now to Paddy Powers' odds for most popular gifts this year, books seem to be leading the pack. The odds on Sir Alex Ferguson's autobiography are 8/13, while Jamie Oliver's latest offering and Helen Feilding's new Bridget Jones instalment are both set to be best sellers. However, the asset class has kept a safe distance from publishers and book retailers, and rightly so - in December 2009 book chain Borders fell into administration. It was previously owned by Luke Johnson's Risk Capital Partners, which sold it to Hilco subsidiary Valco Capital Partners just a month before its collapse.

Virtual delights
Next on Paddy Powers' tip list are video games, with the latest Grand Theft Auto and FIFA releases already posting strong sale figures. The ever-increasing popularity of video games will be welcome news for GAME's current owner OpCapita, which rescued the high street chain from administration for a nominal £1 in April last year. The retailer's fortunes have been transformed over 2013 thanks to a bumper week in November when Xbox One and PS4 went on sale. It has been reported that the group is considering a £200m listing within the next 18 months, verifying the relevance of a physical video game retailer.

Taking a wider view on product categories that traditionally prosper during the festive period, jewellery retailers typically see their strongest sales in December. This year saw EME Capital's acquisition of AIM-listed high-end jeweller Theo Fennell. However, in its 2013 statement, the company's chairman admitted its recent results were disappointing, with 2012 Christmas sales 18% below the previous year. The new owners will undoubtedly hope they can bring about a positive change.

Another jewellery deal was Beringea's further £1.5m investment in Monica Vinader. The high-end jeweller is set to enjoy a bumper year as Kate Middleton sported Monica Vinader pieces soon after the birth of Prince George. Middleton's well-documented outfits and accessories have given several private equity-backed retailers a welcome boost, most notably when she wore the Hobbs (owned by 3i) Dalmatian coat in June, which sold out in just minutes after she stepped out in the garment.

Electric dreams
Another segment of the retail world that continues to eat into stocking space is electronic appliances. Unfortunately, one of the biggest players in this space, Comet, fell into administration in November, missing out on crucial seasonal sales. However, high-street electrical retailer Maplin, owned by Montagu, is set to benefit from its range of goods desired by tech-savvy shoppers. Furthermore, the company is set to target B2B sales as it pilots a new store in Sheffield designed to bring in trade buyers by offering accounts for businesses with ex-VAT prices and a wide range of CCTV equipment, lightings and cables for computer systems.

But, it's not just Christmas presents that makes December such a crucial month for retailers: as soon as Boxing Day hits, consumers will be out in force hunting the year's best bargains. After several years of depressed sales due to squeezed incomes, home furniture retailers traditionally see the bulk of their activity just after Christmas. It was reported in October that DFS, owned by Advent International was considering a listing off the back of improved sales, rising EBITDA and the issue of a £310m bond, which enabled it to fully refinance its previous bond. It would be a smart move for Advent to aim for an IPO after the January sales boom so that new investors can see a positive growth story.

On the whole, it appears that the festive period will be kind to consumer-facing portfolio companies this year. And, as the UK economy slowly scrambles back to its feet again, the British Retail Consortium has found that the UK retail sector has grown by 2.8% over the last three months, filling the industry with hope and joy as another tough year for consumers comes to a close.

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• Topics
• Consumer
• UK / Ireland
• Lion Capital
• Montagu Private Equity
• Permira
• Risk Capital Partners
• Beringea Limited
• 3i
• Advent International
• United Kingdom
• Top story