John Hargreaves: the man behind Matalan

John Hargreaves does not spend much time minding the shop nowadays. The Matalan founder passes much of the year in the rich man’s playground of Monaco, enjoying a standard of living far removed from his modest origins as a Liverpool docker’s son.

The media-shy Hargreaves and his family are already worth about £330m as a result of Matalan’s success, according to the The Sunday Times Rich List. And the tycoon may be about to boost his wealth further if he pulls off a sale of the retailer for as much as £1.5bn.

With the establishment of Matalan in 1985, Hargreaves became a pioneer in value fashion retail. By that time he had progressed from being a tailor’s runner through market stalls to opening his own regional clothing chain in the northwest of England, Jaymax.

But a trip to the US inspired him to much bigger things. Impressed by US outfits such as Sam’s Club, Hargreaves replicated the idea here and transformed the retail landscape.

Matalan was all about low prices and low costs. Its relationships with manufacturers, often in the Far East, and sourcing of grey market branded goods allowed it to undercut the prices of the incumbent fashion leaders.

Its location strategy, focused on lower-cost locations, out of town centres and with plenty of parking space, was ahead of its time. And the original club model, obliging customers to pay to become members, supplied data invaluable for driving sales.

One former Matalan executive says: “It wasn’t so much that he had fantastic retailing skills, but what I saw was fantastic sourcing capability. He was pretty much the first one to source product in the way he did from the Far East and bring it in volume into the UK mass market.”

The innovative approach “registered on the Richter scale” among other fashion groups, the source continues. “They all went to look at it and in many ways replicated it.”

He recalls Hargreaves as being highly focused on product and cost, and expected the same from his staff - right down to always turning the lights off after meetings.

Despite the cost-conscious approach, Hargreaves was careful to ensure relationships with suppliers were win-win. “These days you read about retailers being so aggressive with the suppliers, but he knew the suppliers had to be able to make money too,” says the former executive.

Like many entrepreneurs, Hargreaves, he says, could be a hard taskmaster. “You were only as good as your next season,” he recalls. “You could have had a cracking season but if the new one was off to a bad start he could be difficult.”

Another former executive found Hargreaves a challenging character on occasion and points to Matalan’s churn of chief executives - there have been four in the space of 10 years - as evidence of that. He also says

Hargreaves had a tendency to take credit when things were going well but was quick to blame others when business was tougher.

Even after he had taken more of a back seat, Hargreaves would often be in touch to feed in his thoughts about the business. Now Hargreaves, who floated Matalan but took it private again in 2006, may finally sever his links with it if a sale goes through.

His desire to sell is understandable. At retirement age, and with his children said to be unwilling or unable to run the company, he probably fancies realising the value that he has created and putting his feet up.

Second round bids are understood to be due for submission at the start of next month, but there is some doubt about whether Hargreaves will achieve his price.

While three private equity firms are known still to be interested, two have dropped out. The high price tag attached to the business - 10 times earnings of last year’s £145m - is regarded as unjustifiable by potential purchasers.

Matalan was one of the winners at Christmas. Like-for-like sales rocketed 13.7%, margins improved and debt was cut. A quarter of a century after its creation, Matalan is still a top performer. Whether or not he gets £1.5bn for the retailer, it is undeniable that Hargreaves created a company with enduring appeal.