Retail investor Modella Capital bids for Lakeland amid challenging economy
- Lakeland, a kitchenware retailer founded in 1964, is exploring options for acquiring funding as it faces mounting financial pressures.
- Modella Capital, which owns Hobbycraft and The Original Factory Shop, has emerged as a key bidder for a controlling stake in Lakeland.
- The retail industry is increasingly scrutinizing its financial practices in response to steep operational costs and economic challenges.
In the UK, Lakeland, a family-owned kitchenware retailer established in 1964, has become a target for acquisition as it faces financial challenges amid a tough economic climate. Modella Capital, which owns brands like Hobbycraft and The Original Factory Shop, is reportedly one of the few interested parties in acquiring a controlling stake in Lakeland. This interest emerged following the commencement of the sale process in January, which attracted attention from additional suitors, including Hilco, known for its previous ownership of HMV, and at least one unnamed bidder, indicating a competitive bidding environment. Lakeland's current owners, the sons of founder Alan Rayner, are seeking to secure new funding amounting to tens of millions of pounds. The company is navigating several economic pressures, including the impending increase in national insurance contributions that many in the retail sector view as detrimental. The situation has led to other retailers, like J Sainsbury, indicating plans to drastically reduce staff numbers in reaction to rising operational costs. Such transformations underline the broader trend in the retail industry where firms are actively reassessing their financial strategies in light of unprecedented economic challenges. Recent financial disclosures indicated that Lakeland is facing particularly daunting conditions, with an auditor cautioning about its ability to continue as a going concern. The retailer reported relatively flat sales at £153 million for the year, coinciding with the acknowledgment of high inflation impacting demand across various categories. To address these urgent funding needs, Lakeland reached out to financial advisors from Teneo in January, focusing on establishing a sustainable capital structure that honors its extensive legacy in innovative homeware. As part of this strategic shift, the company completed renewing its banking facilities with HSBC, securing both a £7.5 million revolving credit facility and a £10 million trade finance facility. Nevertheless, the company’s future viability remains uncertain, making it essential for Lakeland to explore various avenues, including potential sale and restructuring options. Modella's pursuit to acquire Lakeland reflects the heightened competition for retail brands and signifies the bid for a fruitful turnaround in a market exacerbated by soaring costs and altered consumer behaviors. This situation serves as a broader cautionary tale for the retail sector as it grapples with the complexities of a post-pandemic economic landscape.