The CEO of London-based retail giant Kurt Geiger is forging ahead with an aggressive growth effort even amid a huge shakeout in the British retail sector. While many other major companies, from Shoe Studio Group to Barratts, are closing hundreds of stores, Kurt Geiger continues to open new doors and strike up partnerships with top department stores across Europe.
“This will be the busiest year for expansion in the company’s history,” Clifford told Footwear News in an exclusive interview.
Already, the group operates the footwear departments in Harrods, Selfridges and Liberty in the U.K., La Rinascente in Italy and Le Printemps in France, as well as a chain of 27 U.K. Kurt Geiger stores (including five airport shops) and a Middle East franchise. In February, Kurt Geiger entered Ireland for the first time through a deal with Dublin store Brown Thomas — and will open eight freestanding doors in the U.K. this year.
“In the domestic market, a number of our competitors are weak,” said Clifford. “Although we forecast that they will eventually come back stronger, we believe that if we stay focused on what we do well, there will continue to be market share opportunities.” He added that already Kurt Geiger has moved from being the U.K.’s sixth-largest shoe retailer in 2003 to the third largest in 2009.
While Clifford acknowledged that this year will be a difficult one, Kurt Geiger has enjoyed an impressive run. The company reported double-digit profit growth in 2008, on sales of more than 160 million pounds ($235 million at current exchange).
“We are certainly not taking this for granted,” Clifford said, “and many of the things that were sitting in our too-difficult pile have now been shifted in the do-it-today pile.”
That pile includes expanding the company’s reach into new markets, including Russia and eventually the U.S.
“[The U.S.] is at the forefront of our minds now, where maybe it wasn’t historically,” Clifford said.
Kurt Geiger also continues to develop its wholesale arm, which includes licensed lines, French Connection and Nicole Farhi. Earlier this year, the firm, which employees nine in-house designers, inked a deal to design, develop and wholesale footwear for British women’s handbag label Radley, and that line will debut for spring ’10. Clifford also is upping the focus on the company’s four in-house brands: Fashionista, Kurt Geiger, Carvela and Solea.
The CEO’s ambitious agenda was a big selling point for Graphite Capital, the 27-year-old British private equity group that bought a 60 percent stake in Kurt Geiger in February 2008. As part of the deal, the management team, which includes Clifford, increased its share to 32 percent from 25 percent, while Harrods retained its 3 percent stake.
A year into the new arrangement, Clifford said he’s upbeat about the company’s future and ready to face the challenges ahead.
“Everyone has to work a little harder than they have in the past couple of years, including us,” he said. “If you’re doing a brilliant job [managing the business], you’ll be OK.”
FN: What is your outlook for the rest of 2009?
NC: We’re in a darker period now. But we will be disappointed if the total company doesn’t grow, because we’re opening a lot of new business this year. But overall our comparable store plan is to be negative. Everyone should be looking at every part of their business right now. Now is the time to review everything carefully. We’re being cautious with inventory, but we’re not doing anything different than anyone else. We also have to keep in mind that things will improve, so we have partnerships to keep hold of and nurture, particularly when we’re growing our business.
FN: How has the business changed since you took on new investors last year?
NC: It hasn’t — it’s business as usual. It’s public knowledge that we were very happy with our Barclays Private Equity relationship before — for two-and-a-half years it was tremendous. We were looking for partners that were as similar to Barclays as possible — bright people who believed in the business plan, but who let management have the space to run the business.
FN: What new projects are in the works for 2009?
NC: We have accelerated our number of store openings. It’s a good time to have partnership discussions with landlords. [This year] will be our busiest year for expansion in the company’s history, with at least eight U.K. freestanding stores planned in cities including Cambridge, Cardiff, Bath, Manchester Airports and shop-in-shops in Topshop Liverpool and Bentalls department store in Kingston-upon-Thames.
FN: How would you compare the economic climate in the U.K. to the American market?
NC: The clouds are much blacker in America than we’ve seen so far in the U.K. or Europe. But America will come out [of the recession] much faster, in its typical resilient way. They’ve been more honest and quicker [to respond to the situation] than either the U.K. or Europe. Unlike here, they don’t have a cushion, it’s pure capitalism, pure Darwinism — survival of the fittest. The upside of this is that people brush themselves off quicker, there’s less embarrassment about failure. So the culture of American business is something that Europe, certainly the U.K., should envy. America also has the “Obama Effect,” and whether or not this is perception or reality, I believe this will make a big difference long term.
FN: You’re based in the U.K., but you also operate stores in Europe and the Middle East. Are you better positioned than other U.K. companies?
NC: Yes. We have a broad mix of distribution and we have some very strong partners internationally. We’re in France at Le Printemps and in La Rinascente in Italy. And we opened in Ireland’s top department store, Brown Thomas, in February. We took their men’s business over from Shoe Studio Group on Feb. 1 and will take over the women’s business on Aug. 1.
FN: What parts of the world are bright spots now?
NC: The U.K. The weakness of the sterling, to some degree, helps us. Suddenly London, for a first time in a long time, is a good value place to shop.
FN: But the exchange rate is also making European-made designer product more expensive. Are you concerned about rising prices?
NC: Times have changed. It’s not the heady days of 2006, and we all have to be careful with pricing. With European-made product, our view is prices will increase by probably 20 percent to 25 percent, particularly on designer and luxury brand shoes. We’re definitely conscious about this and watching it very carefully. It’s changing on a weekly basis, that’s the uncertainty for the brands and retailers. At the moment, we haven’t seen any resistance to prices at the designer level. However, we’re not ruling it out, and that’s why we anticipate that mid-priced product will grow in importance. We are seeing potential for the significant growth of bridge brands and have identified a niche at the 150-to-300-pound price level ($220 to $440 at current exchange) with both private-label and designer brands.
FN: You have 11 stores in the Middle East. How is that region faring in the recession?
NC: It’s fine. Dubai in the United Arab Emirates is still a center of tourism. The large expat community there might slow down a little in terms of shopping, but I don’t see it getting softer. In European vacation terms, it’s the “new Spain,” with tourists coming particularly from [the Continent], the U.K. and Russia. So we’re really generally pleased with our performance in the Middle East. Our partner, Landmark Gulf Group, has been excellent and done everything it said it would do.
FN: Do you have your eye on any other markets at the moment?
NC: We’d like to get into Russia with a partner and we’re in talks about this with numerous parties and hoping to start in 2010. As a business, we’d be perfect for Russia. After visiting three or four times, we’ve found that luxury shoes are well catered to. However, the Kurt Geiger offering and the group of brands we have, call it “upper bridge,” is not. And it isn’t just about price, it’s about fashion ability. The Russians love high heels and boots, and we’re really good at both.
FN: Classic brands like Tod’s and Ferragamo seem to be faring well in the downturn. Why do you think so?
NC: Both Ferragamo and Tod’s are well priced and the quality is good. That’s why both brands are being bought by customers as investment pieces. We have seen men’s, women’s and accessories by Tod’s strengthen over the last 12 months. It’s one of our real success stories.
FN: Are you bringing in more conservative styles right now?
NC: There are two different camps on this. I’m in the camp that everyone’s got enough shoes anyway. We are not going “safer.” We’re not migrating to safe black court shoes. For us, the fresh and new are the best sellers right now. It’s not a time to be cautious in terms of styling. [During the Paris and Milan collections], we found brands that made bold statements appealing, including Prada and Miu Miu.
FN: Which emerging designers are you watching?
NC: Nicholas Kirkwood. He and his team work so hard and do a brilliant job, so it’s probably a very good moment for them because people want more fabulous things. If you’re going to invest in a 500-pound pair of shoes, you want something even more special than maybe you had in the past. So for people like Nicholas, it’s a very exciting, optimistic time.
FN: Your private-label arm accounts for 40 percent of the business. What’s your strategy there?
NC: All our own Kurt Geiger brands are well placed — we had a super 2008 with them. Not only will people migrate to quality, we are also there for people who want to trade down but are still after fantastic, original, made-in-Europe designs. Kurt Geiger could have a bit of a “moment” in 2009. In our own portfolio of brands, Carvela, which is a historical brand that started in the 1970s, is where we’ve seen incredible change. To be honest, it was dusty and old. However, our new design team, namely Josie Wright and Ruby Fisher, have completely turned that business around to make it a real highlight of 2008.
FN: Your airport business was once a big growth vehicle for the company. How is that faring amid the downturn?
NC: We have seven airport stores in Heathrow, Gatwick and Stanstead. Traffic is down, therefore sales are down, and we forecast more of the same for the rest of the year. However, we might open a store in Manchester Airport. We’re looking at a fantastic retail development there.
FN: Does the current economy make it a good time for acquisitions?
NC: As of today, we have made a conscious decision to not acquire any businesses because we have enough [on our plate].
FN: What long-term opportunities are you eyeing?
NC: The U.S. could now be on the horizon for us. It’s at the forefront of our minds now, where maybe it wasn’t historically. We’re only in “thinking mode,” but now it’s only one or two years away, when before it was three or four years away. Also, we are slowly starting to wholesale our own brands starting with Asos.com in the U.K. Wholesale is a viable opportunity to strengthen our international presence, and we intend to take our successful formula overseas.