Poundland's parent company unexpectedly enters negotiations for the acquisition of LK Bennett, a brand favored by royalty

Gordon Brothers Steps In to Rescue LK Bennett

The investment firm responsible for saving Poundland from financial ruin has recently entered the race to acquire the luxury fashion retailer LK Bennett.

Gordon Brothers, known for its expertise in business turnarounds, has reportedly expressed interest in purchasing LK Bennett just as other potential buyers appear to be losing enthusiasm. The retailer, which has counted the Princess of Wales and former Prime Minister Theresa May among its clientele, is currently seeking new ownership.

Initially, high street retailer Next was seen as a leading contender to acquire LK Bennett and safeguard the jobs of its 280 employees. However, sources indicate that Next has withdrawn from the process after submitting a low offer for the brand and its intellectual property, which was ultimately rejected as insufficient.

Other interested parties are said to include Breal Capital, a company that owns several struggling breweries and restaurant chains. Led by Brent Osborne and Alan McLaren, Breal Capital has recently acquired businesses such as Black Sheep Brewery and D&D London, the restaurant group established by Sir Terence Conran.

Industry insiders also mention a third, unnamed bidder under consideration, while Marks & Spencer has been rumored as a possible suitor. Despite this, sources close to the retailer have downplayed any imminent move. TFG London, which owns brands like Phase Eight and Hobbs, has also been suggested as a potential buyer.

Additionally, retail sources have indicated that private equity firm Aurelius—known for placing The Body Shop into administration shortly after its acquisition—and Authentic Brands, the company behind Ted Baker and Reebok, may have shown interest in LK Bennett.

Earlier this year, Gordon Brothers acquired Poundland for just £1 as the discount retailer faced the threat of administration.

Uncertain Future for LK Bennett

LK Bennett has been urgently seeking a buyer since filing a notice of intention to appoint administrators at the start of January. Alvarez and Marsal, a consulting firm, has been appointed to oversee an accelerated sale process.

This is the second time in six years that LK Bennett has faced insolvency, having previously collapsed in 2019. The business was then rescued by Rebecca Feng, who operated LK Bennett’s franchises in China, through her company Byland UK.

At its peak, LK Bennett operated 200 stores across the UK and internationally, including locations in China and Russia. However, the retailer’s presence has since dwindled to just nine standalone stores and 13 concessions.

According to the most recent financial statements covering the year ending January 2024, LK Bennett reported a pre-tax loss of £3.1 million, a sharp decline from the previous year’s £2.3 million profit. Revenue also fell from £48.8 million to £42.1 million.

Financial Warnings and Company Background

Auditors at Grant Thornton have raised concerns about the company’s ability to continue operating, citing “material uncertainty” following a breach of banking covenants.

The board was given until the end of the month to renegotiate the company’s debts. LK Bennett finished the period with £22 million in borrowings, up £2.5 million from the previous year, and paid out a dividend of £229,000.

Founded in 1990 by entrepreneur Linda Bennett, who opened the first store in Wimbledon, southwest London, LK Bennett aimed to bring the elegance of Bond Street to the high street. Linda Bennett became known as the “Queen of the Kitten Heel.”

Gordon Brothers, Next, and Alvarez and Marsal declined to comment, while Breal Capital did not respond to requests for a statement.