Analysis: Dreams' turnaround bedding in under new boss Mike Logue

Staff had been through a turbulent period of uncertainty, and energy, confidence and trust were in short supply in the run-up to the all-important January Sales period.

In his first in-depth interview since taking the reins last August, Logue explains that his number one priority was winning back the hearts and minds of his employees.

He says: “What did I see coming in? The focus had been on survival and a lot less about people. The business had fallen into silos, teams weren’t pulling together. There had been a lack of trust.

“You lose touch in an administration process, you can’t share everything. I’m trying to change that. We want to share with the team where we’re going.”

So the former Mothercare UK boss, who had no experience of rebuilding a business in the aftermath of an administration, made one of his first priorities to host a store managers’ conference - the first in four years for Dreams.

Logue shared his goals with the store managers and asked them to sign a manifesto if they believed in the new strategy. He says the reaction was remarkable. Every store manager got up to put their name to the new plan, which includes a focus on quality, trust, communication and service.

“The reaction was much greater than I expected,” he recalls. “It really lifted people. There was a lack of belief in the business and a lack of confidence. I think that’s returning, but we’ve got some way to go. The previous chief executive had been around for 16 years. That’s a big change for the business.”

Reclaiming the top spot

Logue, who had been in the business for just 90 days, stood on stage and challenged the store managers to “dream big”.

“Why can’t we get a Dreams bed in every home?” Logue says. “We want to be the most recommended bed company. We are already the most recognised, as the marketing over the years has been fantastic. But for me, you have to be recommended, especially with the speed of social media.”

Dreams may be well recognised, but its market-leading crown has slipped.

It has been overtaken by John Lewis after the business turned its attention to survival rather than investment, and slimmed down the estate under the ownership of Sun European to 162 stores from about 260.

Dreams also faces pressure from floorings giant Carpetright, which ramped up its burgeoning beds business while Dreams was distracted by the banks, as well as specialists including Bensons for Beds.

But Logue wants to regain the top spot and the amiable and ambitious Liverpudlian intends to do that by reinvigorating the retailer, which had been “handcuffed over the last couple of years by bank control”.

He introduced a new staff uniform to stores on Boxing Day - the first for decades, according to Logue - including onesies for special events such as charity days. And as well as reinstating the store managers’ conference, Logue has also set up team meetings where people are free to ask him questions about the business.

The 41 year old has even renamed the head office ‘Bedquarters’ and invested in the building to make the most of the extra space acquired since restructuring post-administration. “It’s not a ‘head’ of anything, it’s there to support the business,” says Logue.

Logue also wants to instil more faith in the product. One of his goals is to ensure every colleague sleeps on a Dreams bed at home. “It’s important for me. The team’s got to have confidence in the product,” he says.

And Logue is intent on upping the quality credentials and newness of that product. To that end he asked 10 of the top store managers to visit the retailer’s factory in Oldbury, West Midlands, to give the designers ideas based on what customers had been asking for.

As a result of that meeting, the team came up with a new product, the Anniversary bed, designed to celebrate 10 years of bed making at Dreams. In its first 11 days on sale it sold 1,500 units, the equivalent of £1m in revenue. Dreams had to increase hours at the factory just to keep up with demand.

Marketing rethink

It is this manufacturing heritage, as well as Dreams’ extensive distribution network, that attracted Logue to the position. “It was the potential to strengthen the business through the integration of the factory and retail that excited me,” he says. And now he wants to better exploit it.

“We make a lot of our own product,” he points out. “We’ve got 100 vehicles around the country that we own and six depots. We don’t rely on anyone else to deliver product for us. It’s a huge advantage. We own the experience right to the customer’s room of choice. We offer 10-year guarantees. We have our own factory and we have been manufacturing beds for more than 10 years. We need to make more of that. They are important messages to share.”

Logue says Dreams has not been communicating its advantages enough to customers. “It’s important to explain the benefits,” he says.

Dreams is beginning to do that through remodelled stores, including its Tottenham Court Road shop, which reopened on December 16.

New marketing material around the store points out these benefits “to give customers confidence, and our own teams, and explain what Dreams is all about”.

As well as making its own beds, Dreams also sources from Asia, and Logue wants to inject more quality into those products. He says quality had become “secondary to margin” during Dreams’ challenging period. “Getting the quality back is really important,” he says. “We’ve got to look beyond price. We have three key messages - we make, buy and sell the most comfortable beds.”

The initial signs seem to show that the strategy is working. Dreams recorded like-for-likes up by double digits in the first two weeks of its January Sale. “We’ve had a fantastic start to the year. We’re well ahead of expectations,” says Logue. “The difference has been a team that believes we can get back to that leading position.”

As well as sales, customer service also seems to be improving. Customer satisfaction went from 80% in August to 90% by the end of December, and in the same period its score on influential customer reviews website Trustpilot moved from 2.6 to 7.5. Stock availability for delivery within one week has risen from 35% to 45%.

Online potential

But Logue says “there’s still a long way to go”. In March he will introduce new customer feedback tool ‘pillow talk’, which allows shoppers to provide online feedback direct to Dreams.

“You’ve got to listen to your customer. Were we good in store? Were we good at delivery? It’s very important to check in with your customers,” he says. High performing staff will be rewarded on the back of the initiative.

Logue also wants to improve the online offer. Beds may be one of the last bastions of bricks-and-mortar retailing - not everyone is comfortable with splashing out hundreds of pounds on one without first testing it - yet Logue can see opportunity in the market. Online sales account for 7% of Dreams’ turnover and Logue has plans to increase that. “We expect that to double over the next three years,” he says.

He adds that, since the retailer scaled back, reducing its store count by 100, Dreams has “huge capacity potential” at its factory that can be used to ramp up its online offer at the value end.

Logue argues that people are more prepared to buy online if the bed is for a spare room and subsequently they are spending less on it.

“We’re going after a certain market online,” explains Logue. “We don’t yet operate in the value end of the market online. We have a huge opportunity to go after that market.” Stores, he maintains, will continue to focus on its “core customer”.

Logue’s actions have had an impact on sales, and he will hope they have an impact on the bottom line this year. Dreams slipped into the red last year after the administration, which was caused by huge debts after the business overexpanded under its previous owner, Exponent. The last few troubled years dented profitability and the pre-pack shook shoppers’ confidence in the brand.

“The year to December wasn’t a stellar year for the company,” says Logue. “The pre-pack significantly hit profit performance. For four to six weeks afterwards there was a real impact. However, customers came and our expectation is to return to profit in 2014.”

Growth on the horizon

Logue points to macroeconomic factors that could boost Dreams this year, citing the improved housing market.

“We will see some benefit as people improve their houses. I’m encouraged. Over the last three years the industry has seen market erosion. It’s been a torrid time. But the expectation is it will level out this year.

“Continued reduction in the unemployment rate and disposable income improving will build confidence. We expect to see growth in the second half after three years of heavy decline in the bed industry.”

But he cautions: “It’s still a challenging environment. We don’t expect the double-digit growth to continue.”

Dreams’ owner, suppliers and staff would settle for single-digit sales rises after the challenges it has faced in recent years. Logue says the industry was “enormously supportive” when he joined Dreams, name-checking suppliers such as Silent Night and Temper. “I’m still learning about the product and the industry,” says Logue. “Dreams is a terrific business with a track record of growth and success until it hit the problems in the last 12 to 18 months. There’s a massive amount of passion for the business in the stores.”

If Logue can continue to harness that passion on his quest to turn around the beds specialist, he will be sleeping soundly this year on his Dreams bed.