British retailer Cath Kidston is urgently searching for a buyer as the Covid-19 pandemic continues to impact its business. The company has enlisted the help of Alvarez & Marsal to explore options and solicit bids from potential buyers. Cath Kidston heavily relies on tourists and its international business, especially in Asia, which has resulted in a significant decline in sales. The company confirmed that the outbreak of Covid-19 has had a detrimental effect on its global operations since the start of the year. In response, Cath Kidston has initiated a process to explore various options for the business while continuing its growth strategies.

Cath Kidston, established 27 years ago, operates around 60 stores in the UK and over 200 worldwide. The brand is known for its vibrant floral prints inspired by vintage designs. Despite sales growth in both domestic and international markets, the company has struggled to generate profits in recent years. TA Associates acquired a controlling stake in the company for an estimated value of £100 million about ten years ago, but its current value is expected to be considerably lower. Baring Private Equity Asia became the majority shareholder in 2016 after investing in the company in 2014 and recognized the potential for growth in the Asian market. Cath Kidston also expanded its digital operations and established pop-up stores in countries like Canada.

Unfortunately, the Covid-19 outbreak has exacerbated Cath Kidston’s financial challenges. The company has incurred losses due to the significant impact on Asian markets and the subsequent closures of stores in the UK, Europe, and North America. Although the company has not released recent earnings reports, potential buyers have been informed of losses exceeding £27 million over the past two financial years. Additionally, the nine months leading up to December 2019 recorded an EBITDA loss of £11 million. It remains uncertain whether the company is considering alternatives besides a sale or if a pre-pack administration filing is being discussed.

Despite the difficulties faced by Cath Kidston, there is still hope for its survival under new ownership. The brand’s turnaround efforts, led by CEO Melinda Paraie, a former executive at Coach since 2018, have reportedly shown some signs of improvement. Private equity firms interested in the brand’s potential after the pandemic may consider acquiring Cath Kidston. However, it is unclear whether they will opt to purchase the company as an ongoing business or wait for an administration filing to negotiate more favorable store leases.

Useful links:
1. Cath Kidston Official Website
2. Alvarez & Marsal Official Website