According to a recent report, British fashion retailer Reiss may be put up for sale by retail giant Next. This comes as a surprise, as Next is typically known for acquiring businesses rather than selling them. However, it is speculated that this move could be a way for Next to determine the value of Reiss and potentially increase its stake in the company.

Currently, Next is the largest shareholder of Reiss, having acquired a large minority stake followed by a controlling stake in recent years. Reports suggest that Next, along with fellow shareholder Warburg Pincus, is working with bankers to auction off Reiss, with a potential valuation of £500 million ($703 million). Reiss, founded in 1971 by David Reiss, is a key player in the premium fashion market in the UK.

Unlike many other recent sales in the UK fashion sector, Reiss is not an underperforming or struggling company. The speculated valuation is based on expected profits for the current financial year, estimated to be around £65 million ($91 million) on an EBITDA basis. This raises questions as to why Next, known for acquisitions, would want to sell. However, sources close to Next have expressed doubt about the company actually selling its 51% stake in Reiss.

There is also speculation that Next may be looking to establish a market price for Reiss and potentially acquire the remaining interest held by Warburg Pincus. While the current auction process is seeking offers for the entire business, it is possible that Next may choose to retain its stake alongside a new investor.

Next has a history of acquiring businesses, representing brands such as Victoria’s Secret and Gap in the UK, and acquiring JoJo Maman Bebe and Joules. The company boasts a strong balance sheet, allowing it to make acquisitions without significant debt. Next initially purchased a 25% stake in Reiss from Warburg Pincus in 2021 and exercised its right to buy a majority holding last year.

Reiss operates its online business through the Next Total Platform and has over 60 stores across the UK, with plans for further expansion in its small chain of seven stores in the US. Currently, none of the parties involved have commented on the potential sale of Reiss.

Sources:
– Sky News: [link]
– Financial Times: [link]