Edinburgh Woollen Mill owner Philip Day talks exclusively to Tiffany Holland about his business and why he bought Peacocks.
“It was empty in here but in one week it’s buzzing again,” says Edinburgh Woollen Mill chief executive Philip Day, looking around the cafeteria of Peacocks’ headquarters in Cardiff.
Of the 500 head office staff, 249 were made redundant when Peacocks was plunged into administration on January 18. But, following Edinburgh Woollen Mill’s acquisition of the value fashion retailer a fortnight ago, Day is in the process of rehiring about 80 former staff, mainly merchandisers and buyers.
Speaking exclusively to Retail Week, Day – who has traditionally kept a low media profile – is keen to elaborate on his plans to take Peacocks and Edinburgh Woollen Mill to a new level.
Until recently he and his business were little known to outsiders, but that began to change last year when the retailer became the surprise buyer of the Jane Norman brand and 33 of its shops. Edinburgh Woollen Mill was catapulted further into the limelight by the Peacocks deal, following a roller-coaster ride for the collapsed chain and its staff.
Former chief executive Richard Kirk had hoped to restructure Peacocks, which had debts of £240m. Though it made a 2010 pre-tax loss of £56.7m, the core business was thought to be strong – sales rose 6.2% to £720.9m, producing a £27.8m operating profit.
Administrator KPMG received more than 100 expressions of interest, which were eventually whittled down to two: Edinburgh Woollen Mill and Peacocks supplier SKNL. An Edinburgh Woollen Mill deal looked unlikely at first when it pulled out of talks.
“We thought the deal was too difficult,” says Day. “It got to the point where the administration was going on for too long and we felt like we wouldn’t be able to fix [Peacocks] going forward. It felt too complex.”
But Edinburgh Woollen Mill returned to the table and finally bought Peacocks out of administration on February 22, acquiring 388 stores and concessions. It also aims to take on about 70 more stores that had already shut.
As revealed in Retail Week last week, Day plans to invest £50m in the business over the next 18 months, hoping to restore it to its former 600-store glory. Day says: “Two fundamental things went wrong at Peacocks – it was massively over-geared and had too much debt which couldn’t be serviced and, secondly, it had moved away from what it was famous for.”
Value first
Day believes that Peacocks’ collections lost their way, moving too far in what he refers to as a “high fashion” direction, which in turn pushed prices up.
“There is a big difference between offering [value] fashion and high fashion,” says Day. “Historically, Peacocks was very good at core but it went too far into high fashion.
“Jane Norman is high fashion – garments go in and come out constantly, within four weeks the top seller will become the bottom seller. A business like Peacocks doesn’t work well with that approach.
“Collections will need to be realigned to get customers back through the door. Peacocks’ demographic is quite wide and you’ve got to understand what you’re giving to them, which should be great value.”
Day says many stores were “massively loss-making” because of expensive leases taken on in the past two to three years and, when taking on additional stores, he will negotiate with landlords, including over monthly rents.
He sees huge potential for growth in kidswear and, though there are no plans at present to introduce homewares, there is expertise in Edinburgh Woollen Mill through its Ponden Home business, so range extension could eventually take place at Peacocks.
“I know exactly what categories we’re looking at but I don’t want to tell the competition,” Day says. At the front of his mind is tackling Peacocks’ price points. “We will make sure we buy product at the right price and sell it at the right price. The fundamental focus is the first price, which needs to be the right price, and we want customers to know it’s good value with added value through design.
“We don’t see Peacocks competing with Primark. Prices will not go down, and where prices start at the moment they will remain, but we will look at the prices we feel are too expensive.”
Comparisons with the mighty Primark, which continues to see cash rolling in, are inevitable and Peacocks will have to set itself apart from the value fashion powerhouse.
“Primark fills a particular function and does it very well,” says Day. “The problem has been looking too much like them, so we need product that is different. We’re about collections. We need to be able to stand on our own two feet.”
Acquisitions ahead
In addition to Jane Norman, Ponden Home and Peacocks, the group also, of course, owns the eponymous Edinburgh Woollen Mill stores, which sell high-quality knitwear. The group posted a pre-tax profit of £23.7m last year, according to Retail Week Knowledge Bank, on sales of £193.8m. Those figures do not include Jane Norman.
Day has his hands filled with the Peacocks turnaround but, despite the struggling high street and tough economy, has committed to opening 150 high street and mall Edinburgh Woollen Mill stores this year, as well as more across the group’s fascias. And he sees opportunity for more acquisitions. “There is a lot of organic growth [in the existing chains] but if the right business comes along then we would make an acquisition. It would have to be something we feel excited about and we’re looking for a predominately womenswear retailer.”
A strong brand has been a key criterion for Edinburgh Woollen Mill acquisitions. Jane Norman was established in the 1950s; Peacocks dates back to 1884.
“People buy into brands they like. Our focus is really taking a brand and enhancing it,” Day says.
“People often don’t understand why we purchase businesses that are so different from Edinburgh Woollen Mill. We try to have a blend of businesses, balancing the demographic offer. Fundamentally it is about product for us. The customer absolutely matters to us, so we’ll have to make sure from our end we don’t cut corners. We will engineer quality into our product.”
Not for sale
With more than 1,000 stores under its belt continuing to grow as a group, Edinburgh Woollen Mill is likely to become an ever-more significant player in fashion retail. But Day is keen to emphasise that the Peacocks takeover, and the expansion of his business, are not motivated by a desire to for an eventual sale.
“The rumours that we’re buying it [Peacocks] to build it up and sell – there’s no bloody chance,” he says. “I think it has helped that the staff can now see that I haven’t got an agenda.
“None of the group is for sale. I’m not interested in selling. I feel it’s a part of me, to be honest. I couldn’t even think about it.”
Day is clearly determined to remain in charge of his growing business for a long time to come.
Philip Day: a hands-on retailer
Day is the sole owner of Edinburgh Woollen Mill. He acquired it when he led a secondary buyout of the business, estimated to be worth £69m, in November 2002. Before he became chief executive, it is understood that many of the stores were loss-making.
The renamed Edinburgh Woollen Mill Group went on to acquire 43 Ponden Mill stores out of administration and 77 Rosebys stores and assets, following that retailer’s collapse. Both of the latter subsequently changed to Ponden Home stores and are scheduled for expansion over the next year.
“I make money so I can invest,” Day says. “Every bit of money we make gets ploughed back into the business.
The focus is, how we can invest to make the business better?”
It is perhaps no surprise that Day, who cut his teeth at British fashion retailers Coats Viyella and Wensum and worked his way up to joint managing director at Aquascutum, is a huge believer in British business.
“I feel absolutely passionate about British fashion and the British economy,” he says. “A lot of people are very negative about the economy and the Government is doing a tough job but it’s our country and if we want it to work properly, we [all need to help]. I feel I can help through my business by keeping people employed.”
Day sees Edinburgh Woollen Mill as a family business that nevertheless has an “edge”.
He is married with two daughters and a son. His 22-year-old daughter is poised to join the business this year, while his son has plans to join in a few years once he has completed his degree.
He lives near Brampton in Cumbria but has moved to Cardiff while overseeing the turnaround of his new venture.
A hands-on retailer, Day says Peacocks’ head office staff are likely to see him as much among the buying team as in his office on the top floor, and he can often be seen in the cafeteria among the rest of the staff.
Jane Norman: Winning the customer back
For a retailer to be at breaking point one year and set for international expansion the next is no mean feat, but that is what Day aims to achieve with womenswear retailer Jane Norman.
“I think it can be rolled out worldwide,” Day says boldly.
“With long-term investment, it could be a very big international but quintessentially British brand.”
He adds: “Jane Norman is growing and we have a fairly big business in the Middle East. Since we took over, we have seen a 45% rise in like-for-likes over there – it is absolutely flying. We are looking towards adding another 150 stores in the UK and will be making massive improvements.”
Day recalls that when he took over the collection it was “shot to pieces”. He had to rebuild the team and get volumes into stores. “Now we’re getting the right volumes to get the sales and in the next three months we expect to see a rise in sales and profit,” he says. According to Day, UK sales volumes are at their highest in five years.
Edinburgh Woollen Mill snapped up the Jane Norman brand and 33 stores in June 2011 after it collapsed into administration and now has 76 stores. Formerly struggling Jane Norman had shrunk to 89 standalone stores and 82 concessions from a high point of 200 before falling into the hands of the administrators.
Day believes that Jane Norman had confused its demographic, focusing on customers aged between 15 and 25, when the key was to look towards women of all ages who had the right figure.
Now, Jane Norman clothes are aimed at women aged between 15 and 45. “There is a particular type of figure that it suits,” Day says.
“We understood who the customer was and now we have seen [shoppers] flock back to us in significant volumes.”
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