Speculation that giant US greetings card publisher American Greetings is to buy Clinton Cards out of administration continues to intensify.
WH Smith, Card Factory and others (12 in total) have also expressed a strong interest in acquiring Clinton Cards but would have to stump up more than the retailer’s £10 – 20 million market value in order to wrestle control from American Greetings. The American firm was already owed £16 million as the major supplier to Clinton Cards.
Whichever firm secures the deal, between 350 and 400 of Clinton Cards’ best performing stores (from a total of around 700) are likely to be retained, with some 350 already due for closure by administrator Zolfo Cooper. Zolfo has set a deadline of June 8 by which the business must be sold, but has emphasised that American Greetings is not the only remaining bidder.
American Greetings acquired the £35 million of debt owed to the banks by the troubled retailer in early May. It is thought that a deal will be struck next week, bringing hope to at least half of Clinton Cards’ anxious shop staff.
American Greetings is headed by chief executive Zev Weiss, who shocked the UK greetings industry with the unexpected decision to demand immediate repayment of the debt earlier this month, pushing the retailer into administration.
A family run firm with almost a century of heritage to its name, American Greetings posted a pre-tax income of £60.8 million for the year to February 29, down from £97.1 million the year before. Turnover increased 6 per cent to £1.05 billion, including £26.8 million generated via the acquisition of UK greetings card publisher Watermark, which concentrated almost exclusively on the development of products for Clinton Cards.
The US greetings card market is dominated by American Greetings and Hallmark Cards, which have at least a 90 per cent market share between them. The rival firms are also head-to-head in the world leading UK card market, where American Greetings operates via UK subsidiary UK Greetings. Between them the two card giants control the bulk of greetings products sold through grocers and multiple retailers, via a number of brokerage systems. An entry into the retail scene would therefore put American Greetings into direct competition with some of its biggest customers in this country.
In Spring 2011 UK Greetings added a sixth brand to its portfolio in the form of iconic American card and stationery supplier Papyrus, which is currently making strong inroads into the UK market with over 70 concessions in stores around the country.
Papyrus is a high-end greetings and stationery brand with price points for cards that range from £1.90 – £5.70 and the majority of products positioned towards the top of the pricing structure.
In 2009 Papyrus forged a deal with American Greetings in which Papyrus exchanged its card publishing business for the retail outlets then owned throughout the states by American Greetings. The two companies continue to work closely together and Papyrus now operates via the Schurman Retailer Group from around 180 stores across America, where it is headed up by Dominique Schurman.
Schurman was spotted earlier last week at the P G Live greetings card exhibition in London, prompting rumours that the group had its eye on the prize of Clinton Cards. Papyrus spokespersons have, however, consistently denied rumours of a possible take-over of the British retailer, insisting that the plan is to concentrate on the successful programme of concessions.
When shares in Clinton Cards reached a low point around Christmas 2010 its major suppliers including American Greetings were tolerant with respect to the debt owed and bolstered the retail chain over a year of consistently tough trading that saw a non-family member take over as chief executive for the first time in Clinton’s history.
Former Starbucks chief Darcy Willson-Rymer, who took on the task in October 2011, embarked upon a strategic review but failed to win over the board of American Greetings, which had strong ties with the Clinton family established over 40 years of trading together.
In this context the launch of Papyrus into the UK market may be considered timely, and in its current acquisitive mood American Greetings may explore what other British brands it might be able to snap up via the Clinton’s fallout.
The greetings card market as a whole in the UK – worth upwards of £1.2 billion but saturated with good suppliers – continues to go through a phase of consolidation that has seen established publishers buying up desireable smaller companies over the past two years.
