Reliance Brands, a subsidiary of India-based Reliance Industries, has agreed to acquire 100% stake in 259-year-old British toy retailer Hamleys from Hong Kong-listed C.Banner International for US$88.5M. Here, an analyst offers their view on the news.
By Priyanshu Rana
Hamleys, which operates 167 toy stores across 18 countries, has been facing headwinds due to the impending Brexit and economic slowdown in the UK. For the year to 31 December 2017, the iconic toy store chain reported a revenue drop of 2.5% to £66.3m due to macroeconomic factors and store closures.
Reliance Retail, on the other hand, was looking for an opportunity to emerge as a dominant player in the global toy retail industry. Already, it has a pan-India franchise agreement to operate 88 Hamleys stores across 29 cities. The deal will now give the Indian acquirer full control of those outlets. Reliance Retail can leverage its supply chain management and distribution network to expand Hamleys’ business in India.
One of the most apparent benefits of this deal for Reliance Retail is to compete with other global e-commerce giants such as Amazon and Walmart, whose operations were hit massively after the introduction of a new e-commerce policy in India. As a result, this is the right time for the domestic major to dominate the retail scene. Organized toys market in India is growing at around 15% riding on growing income of Indian middle class, and Hamleys has already set a premium image in the mind of consumers particularly due to its store formats and presence in airports.
The deal will also help Reliance to reduce dependency on its petrochemicals and energy segments, and diversify revenue streams at a time when global oil prices are experiencing volatility. Even if Reliance Retail could not capitalize on the global footprint of Hamleys, the burgeoning Indian toy market will give a crucial opportunity for Reliance Retail to make its presence felt in the premium toy segment.
Priyanshu Rana is a consumer analyst at data and analytics company GlobalData.