Chalhoub Group seeks more acquisitions after buying majority stake in UK's Threads Styling

Dubai-based company 'cautiously optimistic' about GCC's luxury goods market amid stronger dollar and higher oil prices, chief investment officer says

Threads Styling will continue to operate as an independent entity after the deal. Photo: Chalhoub Group

Dubai-based luxury retailer Chalhoub Group is seeking further brand acquisitions to boost its digital presence and geographic footprint after it bought a majority stake in the UK's digital luxury retail platform Threads Styling.

Its acquisition target search, which is still in the early stages, is focused on brands in the luxury fashion, beauty and home products segment of the market, Sharmila Murat, chief investment officer of Chalhoub Group, told The National.

"It makes the most sense to invest in a global brand but has real potential to be developed in our home markets in the Middle East," she said in an interview on Wednesday.

"As a group, we are looking to go deeper into the Gulf markets and further solidify our position here. We are also looking closely at Egypt, although recently there's currency volatility, and we're generally looking positively at India."

Chalhoub Group is "cautiously optimistic" about the GCC's luxury goods market amid a stronger dollar and higher oil prices that should continue to drive growth in the bloc's economies, Ms Murat said.

The company is watching the global macroeconomic developments — from higher inflation to currency volatility — "very closely" but remains "positive" about the region, she said.

These macroeconomic developments have "polarised" the luxury market even further, with the top brands remaining "strong and relevant", while there is "weakness in the middle of the pack". Expensive brands have seen a shift in purchasing patterns, she said.

Last year, the Chalhoub Group developed an acquisitions strategy, as part of a broader company reorganisation, focused on four pillars: invest in brands as the company transitions from being a brand partner to brand owner; invest in new business models or channels of distribution that will expand the business online; geographic expansion; and investing in retail technology tools.

Sales of luxury goods in the GCC grew 23 per cent last year compared with 2019, outpacing pre-pandemic demand, a March report by Chalhoub Group revealed.

The market is projected to reach $11 billion in 2023 from $9.7bn in 2021, growing at a compound annual rate of 7 per cent.

Growth in GCC luxury sales will be fuelled by factors such as increasing demand in Saudi Arabia, the return of international tourists to the UAE, the emergence of new luxury consumers with a growing appetite to purchase locally and the acceleration of e-commerce, the report said.

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Threads Styling acquisition

Threads Styling's founder and chief executive, Sophie Hill, has retained the shares she owns in the business. At the same time, Chalhoub Group has acquired the remaining stake, the Dubai company said in a statement on Tuesday.

The company declined to disclose the size of its stake and the value of the investment.

Threads Styling offers personal shopping service through social platforms and chat-based commerce, catering to Millennial and Gen Z customers across its channels on Instagram, Snap and TikTok.

The deal provides Chalhoub Group with a digital personal shopping platform that has "true credibility and following", allowing it to "stay relevant" with younger luxury consumers, Ms Murat said.

Threads Styling also provides further global access with its UK home market, an office in New York where its US business is growing rapidly and a foothold in Asia Pacific, where brands are waiting for China to re-emerge from Covid lockdowns.

"To have a foothold in Europe, US and Asia, with synergy in the Middle East markets, this is very good," she said. "As a group, we keep an eye on these markets."

The transaction will be financed through the company's funds, Ms Murat said, without providing details.

For London-based Threads Styling, the deal with Chalhoub Group brings capital injection to pursue "aggressive growth" plans in the US and the Middle East, as well as a partnership that offers complementary skills, resources and expertise, Ms Hill said in an interview.

She said the funding would accelerate investment in technology to back its chat-based e-commerce business, while Threads Styling would hire more people across its personal shopping, e-commerce and tech teams.

Reaching profitability will be a "priority" as the company builds a sustainable business, she said.

Threads Styling will continue to operate as an independent entity with Ms Hill at the helm.

Rothschild & Co was the financial adviser and Freshfields Bruckhaus Deringer was the legal counsel to Chalhoub Group on the deal.

Broadgate Advisers was the financial adviser and Latham & Watkins was legal counsel to Threads Styling.