Harrods: It is rare for a shop to change hands for twice its latest annual sales, but even its many detractors could not plausibly call Harrods just a shop. Occupying an exceptional island site in London's Knightsbridge, Harrods is cut off psychologically as well as physically, since few locals would claim to be customers.
It's a destination for rich and bored middle eastern visitors to the city. With a valuable brand and a business that is simply explained, it’s an ideal trophy asset for its new Qatari owners. They may even find the media coverage of the store returning to their comfort zone of the fashion and shopping pages after years of financial and management drama.
Mohamed al-Fayed won control in 1985 after a ruling from the Monopolies Commission which was perverse, even by the shameful standards of the day. A bid for Harrods’ owner from “Tiny” Rowland, a buccaneering trader, was blocked on the grounds that cheap bedding produced by his company might somehow contaminate the national treasure that was Harrods.
Rowland sold his 29.9 per cent stake to al-Fayed on the understanding that he could buy it back if the ruling was overturned. Instead, the Egyptian launched his own 615 million pound bid for Harrods’ holding company, House of Fraser.
The feud between the two lasted until Rowland’s death.
So have the Qataris got a mid-season bargain, or are they paying Harrods’ usual eye-watering mark-up? In the year to February 2009, pre-tax profits were 56 million pounds after servicing debts of 600 million pounds. Since then, the fall in sterling may have encouraged its affluent tourists, but paying 1.5 billion pounds looks too much like the sort of statement of wealth so familiar to Harrods’ customers. Exploiting brands internationally requires heavy investment, but can produce impressive returns, as Burberry is demonstrating. Duplicating Knightsbridge in Shanghai was surely beyond al-Fayed’s budget, but presents an attractive prospect for a state with more money than it can spend. In London, Harrods might benefit from greater investment and a slower turnover of managing directors. Perhaps the locals might start to visit the store even when there isn’t a sale on.