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March 4, 2013 2:09 pm
Philip Day, the man who rescued Peacocks in 2012, saving 6,000 jobs at the struggling Cardiff-based value clothing retailer, believes the Welsh capital can become a fashion centre to rival London or Manchester.
It may seem an outlandish forecast at a time when the UK retail sector is on its knees, with cash-strapped families tightening belts as the recession shows little sign of easing.
But in an interview one year after the acquisition by Mr Day’s Edinburgh Woollen Mill, the Cumbria-based entrepreneur claims Peacocks is now back in profit.
Against the trend elsewhere in retail, he says he has been opening stores and has taken on an additional 2,600 staff, 760 of them in Wales. He has also relocated to Cardiff the head offices of Jane Norman, the young women’s high street fashion brand he acquired in 2011.
“We want to make Cardiff a proper fashion city . . . People in fashion always think the buyers and merchandisers have to be in Manchester or London. But Cardiff is a little gem. We have one of the best fashion universities in the country, wonderful infrastructure and great beaches on our doorstep.”
Despite Mr Day’s optimism, Peacocks’ collapse into administration has proved doubly painful for many former employees, who in addition to losing their jobs have also seen cuts to their pensions, after the administrators raised estimates for the company pension deficit. In its latest creditors’ report last month, administrators KPMG increased its estimate of the pension deficit from £15.8m to £26.3m
Mr Day, the sole owner of clothing retailer EWM, having led a secondary buyout in 2002, is familiar with struggling companies. Jane Norman was bought out of administration in June 2011, as was Ponden Home, the textile and homeware company.
Some retail analysts are sceptical that Mr Day can turn round Peacocks, a dowdy brand facing competition from bigger rivals such as Primark and the clout of grocers such as Tesco.
“The challenge is the UK is saturated with value clothes retailers. You have to get the product right,” says Neil Saunders, managing director of Conlumino.
But Sarah Wilson, director of consulting at the Egremont group, says: “Most high streets are polarised, but the value end is doing proportionately better than people in the middle.”
She adds: “When times are tough, privately owned retailers can think longer term.”
Cardiff is a little gem. We have one of the best fashion universities in the country, wonderful infrastructure and great beaches on our doorstep
- Philip Day
Maureen Hinton of Verdict estimates that before the takeover Peacocks had a share of the value segment of market of about 4 per cent, against 20 per cent for Primark, part of Associated British Foods.
But she says the model Mr Day is developing for Peacocks may help it weather the recession. “It works well for a family who live locally, on a budget, and don’t have a car, or don’t want to drive,” she says.
Mr Day points out that while Primark operates in big city centre sites, Peacocks is focusing on smaller stores with lower rents on secondary high streets, or the main streets of seaside or market towns.
“The previous management decided they wanted to make it more fashion-led and pushed into city centres. But you need a lot of footfall in those sites. Too many were under water, not making money,” says Mr Day.
He believes Peacocks caters for a consumer who looks on clothes as an investment. “They don’t come in because they are looking for markdowns. In fact there is nothing worse than being a shopper who buys something and then finds the following week it’s 25 per cent off.”
His policy is to follow a “first price, right price” approach. Margins have improved by slashing the amount of stock sold at reduced prices.
“I ask the merchandisers all the time how much they think they will sell at full price. If they say 80 per cent, I tell them to reduce the order. There is no point in bringing in the volume just to mark it down, because you’re undermining your business.”
When EWM bought Peacocks the administrators had already disposed of about 200 unprofitable stores. The company now operates 435 shops, having acquired about 100 new ones in the past year, and hopes to have about 600 stores in the next couple of years.
Mr Day is also investing in online – where a lot of traditional retailers have come unstuck.
Being based in Cardiff has helped the company to contain operating costs, whether it is the cheaper hotel accommodation he can offer his buyers and merchandisers or the ease with which Peacocks can find young designers from the local colleges.
EWM is interviewing for a chief executive for Peacocks. But 47 year-old Mr Day, a self-confessed workaholic, is quick to dismiss suggestions that he is reducing his workload.
“I’m only a young guy. But the group is so much bigger today. I can’t physically do all the meetings any longer.”
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