No shop closures as hedge fund buys out Waterstones

By Geoff Percival and Eamon Quinn

No shop closures are anticipated after the sale to a hedge fund of bookseller Waterstones, which owns Hodges Figgis in Dublin and leading book shops in Cork and other cities.

Elliott is buying Waterstones — which operates seven shops across Ireland — from Russian billionaire Alexander Mamut.

The transaction is expected to close next month.

Waterstones’ chief executive James Daunt will remain in charge of the running of the business and has already dismissed any suggestion of shop closures as a result of the sale; instead saying the company will look to expand further; a move which will be helped by Elliott’s backing.

While much of that expansion is likely to occur in the UK, he did not rule out the prospect of further international growth. As well as its operations in the UK and Ireland, Waterstones has a presence in the Netherlands and Belgium.

Waterstones earned almost €13.5m in book sales from its stores in the Republic last year, down from over €14.1m posted in the previous year, but the bookseller still managed to increase profits as costs fell.

For the 52 weeks to the end of April, it posted an after-tax profit of €2.13m, compared with a profit of €1.59m in 2016. It also cut the costs of its stocks — books waiting to be sold — to €6.18m from €7.32m in the year.

The accounts show that leases for its stores came to €1.37m, down from almost €1.59m in 2016.

Management fees charged to Waterstones Booksellers Ireland Limited to other companies in the Waterstones group totalled €246,000 in the year. Staff costs for its 77 staff ran out at almost €2.28m, little changed in the year.

The buyout comes during a period of turbulence in the UK retail sector. Electronics chain Maplin and Toys “R” Us UK both collapsed in February as a combination of rising sourcing and staffing costs, weakening consumer spending and the steady rise of e-commerce combine to punish bricks-and-mortar retail chains.

With its foray into book retailing, Elliott is entering a particularly challenged business. Amazon continues to dominate book sales even as it has ventured far afield from its first product category, having helped to kill off former big names such as Borders.

Barnes & Noble persists in the US, but endured a 6.4% year-over-year drop in holiday-season sales last year.

In Britain, Waterstones had sales of more than £400m (€460m) in the 12 months to last April, according to most recent accounts.

The chain returned to profit in 2016 for the first time since the financial crisis and made a pre-tax profit of £18m last year.

Waterstones is not Elliott’s first retail bet. It bought bankrupt UK video-game retailer Game Digital in 2012, before floating it in 2014.

- Additional reporting Bloomberg

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