Dunelm, the UK based home furnishings retailer recently announced that it had reached an agreement to acquire the assets of WS Group for £8.5m, subject to the companies within the group being placed into administration. WS Group comprised of 3 core assets. Worldstores, one of the UK’s largest online home & garden retailers; Achica, a members only online furniture and homeware store known for its flash sales; and Kiddicare, a physical and online retailer for families with young children.
All three businesses appear to complement Dunelm’s existing offer by extending the product range and increasing online scale. As part of the deal, Dunelm will acquire a unique technology platform which provides rapid stock management between suppliers and customers enabling next day, or day of choice, delivery.
Dunelm plan to inject up to £15m into the business with an aim of minimising disruption for suppliers and customers but expect that WS Group will incur losses in the current financial year but will at least breakeven in the following year. With any acquisitions there are risks – the integration of the new businesses, leverage of technology, addition of new product lines and economies of scale may not proceed as expected. Clearly WS Group has faced challenges which have caused its businesses to go into administration; Dunelm will hope that with its investment these challenges can be overcome.
Dunelm have been expanding in recent years by launching new stores and adding to floor space. This acquisition appears to be a relatively low cost transaction for Dunelm and one which fits with its wider growth strategy by improving their range, distribution technology and more than doubling its online scale. Given the problems WS Group have faced, however, it will be interesting to see whether or not this turns out to be a good piece of business for Dunelm.