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Losses for owner of Selfridges more than double

Higher finance costs offset jump in sales at upmarket global department store group Cambridge Retail

Losses at the company that owns Selfridges and a number of other upmarket department stores more than doubled last year as higher finance costs offset a jump in sales to £1.6bn.

Cambridge Retail Group Holding, which is owned by Central Group, a family-business Thai investor, and by Saudi Arabia’s Public Investment Fund, recorded a pre-tax loss of £340mn in the 53 weeks to 3 February 2024, from £126mn in the same period a year earlier.

The wider losses came despite revenue jumping by 95 per cent to £1.6bn, from £804mn, and partly reflected a surge in its finance bill, which includes interest paid on borrowings, to £206mn from £96mn, accounts filed at Companies House on Thursday showed.

Cambridge’s results are the latest to highlight a challenging period for premium brands as spending among affluent shoppers remains subdued. Estée Lauder, owner of Clinique and MAC Cosmetics, on Thursday cut its dividend and abandoned the group’s profit forecast.

The Selfridges owner also disclosed that it had cut 500 jobs in the period it was reporting on. It now employs about 7,300 staff across the group, which includes Selfridges in the UK, De Bijenkorf in the Netherlands and the Brown Thomas and Arnotts brands in Ireland.

Central Group, owned by the Chirathivat family is the majority owner of the luxury retail chains. It first bought the portfolio with co-investor Signa Group from the billionaire Weston family for £4bn in 2021.

The partnership with Signa unravelled after property mogul René Benko’s empire ran into financial difficulties and subsequently collapsed last year.

Earlier this month Central struck a deal with Saudi Arabia’s sovereign wealth fund to co-own the group, with the PIF owning 40 per cent of its operating and property companies.

In separate filings for Selfridges in the UK, which was founded in 1909 by US-born magnate Harry Gordon, losses widened slightly to £41.9mn during the same period, from £39.3mn, on revenue of £834mn.

Selfridges Group said it was “pleased” with its performance last year “which saw a million more visits to our stores”. It added that this year it was trading in line with expectations.

Volkswagen and its EU rivals have allowed China to steal a march in EVs

The auto industry supports 6 per cent of the EU’s jobs, and Volkswagen is its biggest carmaker. So when the German group warns it must close three plants at home and axe thousands of workers, that is a sign of the stress Europe’s carmakers are under. European sales have yet to regain pre-pandemic levels, just when the industry is engaged in an epochal shift from internal combustion engines to electric vehicles — and has allowed Chinese rivals to leapfrog ahead in the new technology. Slow off the starting line, Europe’s carmakers face a restructuring as wrenching as the US auto industry after the 2008 financial crisis. But policy needs to play a more constructive role, too.

Despite two profit warnings in three months, Volkswagen is not in such desperate straits as the biggest US carmakers 15 years ago. It says it needs to raise operating margins in the core VW brand from 2 per cent in recent quarters to 6.5 per cent by 2026 to fund investments in its future. Targeting three plant closures may be its opening gambit in talks with Lower Saxony, which has 20 per cent of voting rights, and the unions. But VW and Germany are not alone in having to slash overcapacity and costs. Italian politicians are pushing Stellantis, which owns Fiat, Peugeot and Opel, to keep open its Fiat plant in Turin despite falling sales. Some French assembly lines are already being shifted offshore.

Germany’s big carmakers, in particular, were too complacent in assuming that the lucrative Chinese market could tide them over the tricky EV transition. Chinese manufacturers have stolen a march technologically and are supplanting foreign rivals in a market where, in July, half of all vehicles sold were EVs or plug-in hybrids. China’s upstarts benefited from huge state subsidies and lower labour costs, and started from a cleaner slate. They grasped more quickly, though, that EVs’ value lies more in snazzy software and electronics than in mechanics. In Europe, the cheapest new EV last year cost almost double the cheapest ICE car; in China, it cost 8 per cent less. China’s EVs are not only more affordable than foreign ones, they are often better.

Fearing a flood of subsidised imports, the EU this week imposed higher tariffs on Chinese-made EVs. But protectionism is not the answer. Europe’s auto industry has to face up to the need to cut costs by reducing capacity and jobs. With fewer moving parts, EVs were always going to need fewer people to build them. Though there will be social costs that must be mitigated, governments need to accept that keeping surplus or lossmaking plants open will only delay or derail a successful transition to new technology.

As well as making EVs more cheaply, Europe’s carmakers have to speed up model development, and find partners or outsource areas where they lack expertise. Tie-ups with Chinese counterparts they can learn from make some sense — though China’s newcomers might also use these to plug gaps in their own prowess, and gain access to ready-made distribution networks.

Smarter policy must also play a role. The EU has banned the sale of new ICE cars from 2035, and its tightening emissions standards will force automakers to sell fewer of them over time. But as Mario Draghi’s report on competitiveness noted last month, the EU decreed targets without a proper industrial strategy to achieve them.

It needs a comprehensive approach to developing the entire supply chain, including raw materials and the battery technology that lies at the heart of EVs, and of China’s EV success. Investment in charging networks and financial incentives are needed to encourage consumers to switch, so higher volumes start to cut production costs. It is not yet too late for Europe’s auto industry to narrow the EV gap. But China has opened a substantial lead.