Analysis: The exit of the Roche family from the retail trade marks the determination of major British retailers to increase their share of the booming Irish retail business at a time when their home market is in the doldrums.
With numerous out-of-town centres in construction throughout the State, the Roches deal gives Debenhams scale to instantly increase market share here without having to wait for developers to complete their work. In a single swoop, the chain will have an additional 500,000 square ft of floorspace in prime buildings such as Roches' sites in Henry Street, Dublin, and Patrick Street, Cork.
Debenhams' upfront consideration of €29 million is payable in three instalments: €15 million at completion, €5 million in a year's time and €9 million in two years. Such sums are modest, given that Roches has been trading since 1901. They reflect the chain's perceived difficulties keeping up with nimbler rivals who can bring new fashion lines to the market within 14 days.
But there is nothing modest about the rents the Roche family will receive, which will amount to nearly €18 million per year. Thus the transaction will be worth some €209 million to the Roches over the course of the next 10 years, not withstanding further growth in the value of the underlying property assets.
That's more than enough to guarantee the future wealth of the descendents of William Roche, who set up the original business in Cork.
Debenhams will have to invest significant amounts to fit out the Roches outlets in its own image. It is likely to flood these stores with the branded concessionaires that dominate its home business.
Retail insiders say many of Roches' in-house concessionaires will be removed, but it is not yet clear where the axe will fall.
If Roches' decline meant it was all the more likely to come on the block, its Henry Street rival Arnotts has already embarked on a massive expansion that will see it occupy almost all the buildings between Middle Abbey Street, the GPO Arcade and Liffey Street. This project will be crucial to the long-term fortunes of the Dublin retailer.
But Debenhams is not alone. Persistent speculation suggests that John Lewis, another big British player, is taking a serious look at Ireland. With others such as House of Fraser and Harvey Nichols here already, the disappearance of another home-grown brand is in keeping with what some see as the relentless anglicisation of retailing here. For some, certain Irish shopping streets are less and less distinguishable from an English high street. However, that downplays the role of big Europeans retailers.
The onward march of Tesco, for instance, has been accompanied by the rapid expansion of the German-owned discount chains Aldi and Lidl. And while the British fashion colossus Philip Green makes profits of €16.6 million at his 101 Irish outlets, his business here is coming under pressure from mass market titans such as Spanish chain Zara and Sweden's H&M.
For all these operators, Ireland combines high consumer spending, virtual full employment, and a growing population.
Despite the pressure of higher mortgage rates and the oil price spike, the Debenhams deal shows that international players still see there's money to be made here.
Meanwhile, Roches has sold the lease on a 10th site, at Wilton in Cork, to Marks & Spencer. After a long period of corporate woe, M&S is in recovery mode.
Even when times were hard, Ireland was a bright star for M&S. Alive to that, the chain is expanding rapidly. It had four sites in 2003. The Wilton deal, combined with a new opening in Tallaght next year, will bring its total to 16. M&S currently has 400,000 sq ft of floorspace. Add in a new extension at Liffey Valley next year and these three new sites will bring floorspace up 20 per cent to near 500,000 sq ft.
For domestic retail brands across the board - Superquinn, DID, Power City, Golden Discs, Easons, et al - the relentless pull of the big-spending Irish consumer means tough going will become only tougher.
