Burton forms home shopping joint venture with Littlewoods

Burton Group and Littlewoods, two of the best known names in British retailing, are linking up to launch a new, mega mail-order company. The venture marks a new aggressive mood at Littlewoods and is further evidence of the convergence between home shopping and the high street. Sameena Ahmad reports.

The new company will contain all of Burton's fashion multiples home shopping businesses, including Dorothy Perkins, Racing Green, Top Shop and Hawkshead. Burton will hold a 65 per cent interest with Littlewoods, the family run mail order to pools company, taking a 35 per cent stake for pounds 15m paid to Burton.

Burton will receive royalties based on sales from the new venture as well as its share of profits. Although the new venture will be managed by Burton director Robin Klein, it will be controlled on a 50:50 joint basis. The new company will have access to six million customers, double Burton's current database. In a separate agreement, Littlewoods will feature all of Burton's fashion brands on around 30 pages of its established home shopping catalogues. Barry Gibson, Littlewoods new chief executive, said the deal marked a change to a more "outward looking culture," at the company. James Ross, Littlewoods' chairman, said the Burton deal was one of several likely joint ventures. Speaking as Littlewoods announced a 75 per cent jump in half year operating profit to pounds 46m, as strong mail order sales offset a slump in takings from the football pools business, Mr Ross said the company hoped to bid to run the National Lottery as part of a joint venture when the current licence ran out in 2001. "A lot of people have approached us about this. We are looking at bidding to run the Lottery." Intense competition from the new mid-week Lottery left Littlewoods' trading profits from its leisure division 24 per cent down to pounds 8.9m in the half year to October

Burton said the partnership, which was initiated by Barry Gibson, Littlewoods' new chief executive, would enable it to accelerate the growth of its home shopping business. John Hoerner, Burton's chief executive said: "Our home shopping business is ready to expand. We are now in a position to accelerate this process by utilising Littlewoods extensive expertise and home shopping infrastructure."

James Ross, Littlewood's chairman, denied the deal was a poor substitute for its failure to buy Freemans, the Sears mail order group. Littlewoods was blocked from buying Freeman's by the competition authorities earlier this year. "This deal give us a much lower risk and a shorter payback than Freemans would have," said Mr Ross, "Freemans would have given us scale overnight, but it would have tied up our management time." The bid for Freemans cost the company pounds 4m, however that was offset by a VAT rebate.