On a recent fall afternoon in London, a steady stream of shoppers — from Middle Eastern tourists to local Brits — stepped into Harrods Shoe Heaven.
Some arrived on the fifth-floor shoe mecca via the retailer’s grand Egyptian escalator. Others took the express elevator adorned with fluffy clouds (to fit with the theme of the department), while the posh crowd used the discreet side entrance that offered easy access to their private cars.
No matter how they got there, the visitors were clearly ready to shop, including Rebecca Farrar-Hockley, buying and creative director for Kurt Geiger, which operates the new, much-buzzed-about art deco-style space in partnership with Harrods.
Farrar-Hockley was on hand with Kurt Geiger CEO Neil Clifford to give Footwear News a tour. And while she had been to the 42,000-sq.-ft. floor several times since its August opening (and was responsible for a large portion of its brand mix), she found several must-have shoes that day.
In just 45 minutes, she snapped up six pairs, including furry Isabel Marant boots, Valentino’s butterfly runway pumps and Chanel sneakers. “Rebecca buys [like this] every time we’re here,” joked Clifford.
Many of Harrods’ customers share that same fervor for luxury footwear. In fact, the most expensive and exclusive styles are often the retailer’s best-sellers. That’s why both Kurt Geiger and the department store are so bullish about the new project.
“We [have] mutual values when it comes to delivering the ultimate luxury experience for our customers,” said Helen David, Harrods’ fashion director of women’s wear, accessories, fine jewelry and children’s wear. “Kurt Geiger’s understanding of our store and the footwear business is unsurpassed.”
But Shoe Heaven is one part of Kurt Geiger’s comprehensive growth strategy. The firm, which expects to report annual sales of about 318.2 million pounds ($512.2 million at current exchange), is planning further expansion in both Harrods and Selfridges, where the recently opened men’s footwear floor is doing robust business.
Additionally, the company is pushing a new fast-fashion wholesale launch, expansion in key international markets and a major push online (e-tail accounts for about 20 percent of the business).
However, Kurt Geiger has had a tougher time in the U.S. market. Retail plans have been scrapped for the near term, and its three stateside locations have closed. But the firm has landed new distribution with Bloomingdale’s and Zappos, and it continues to grow at Nordstrom and Lord & Taylor.
And it is forging ahead with new support after Clifford and team completed a management buyout from The Jones Group Inc. earlier this year, with the backing of Sycamore Partners.
“We are confident in Kurt Geiger’s potential for growth and look forward to working with Neil and the team to help ensure the business is positioned for long-term success,” said Stefan Kaluzny, managing partner at Sycamore Partners. “The company has a strong and dedicated management team, a deep history of partnership with exceptional department stores and its own distinctive portfolio of brands, all of which have allowed the company to stand out.”
Here, Clifford and Farrar-Hockley offer up more insight into their achievements so far, lessons learned and the roadmap for success going forward.
What has the transition been like from The Jones Group corporate umbrella back to a private equity structure with Sycamore Partners?
NC: We know how to manage private equity. We communicate with Sycamore a lot. We have a ton of data, and they see everything — the performance of every brand, every store, every week. That’s the best way to be: completely open. What we like about Sycamore and private equity in general is that these guys are smart as hell. It’s like being in a full-time university. You are always learning. They’ve got big brains, and they empower us to make big decisions. It isn’t just about how you keep your comps going; it’s how you double the size of the company. We like that — it’s a motivator for us.
The Harrods Shoe Heaven debut generated buzz for your company this year. What kind of long-term growth potential does the floor present?
NC: We’ve doubled our space, and that’s going to keep us busy. We see the business growing from 60 million pounds to 100 million pounds [$96 million to $160 million at current exchange] in the first few years. We also see more opportunities within Selfridges, and then there’s the whole online piece. Luxury will continue to grow. We’ve had double-digit comp increases [in that category] for 10 years. We’re lucky London is the center of global wealth. It’s an international hub and a place where people love to spend time.
What luxury labels are you most bullish about?
NC: We are amazed by and excited about Manolo Blahnik. It’s been a huge pleasure to work with a U.K. brand and help that team to create such a great business. We love working with the family, and we’re only at the beginning of that relationship. We’re excited about what Giuseppe Zanotti has been doing in men’s and women’s. He never grows up, he never gets old, and he’s always looking forward. We like what Pierre [Denis] and Sandra [Choi] are doing at Jimmy Choo. Their new store [on Bond Street] looks amazing and has taken them to the next level. Ferragamo has been a [quiet powerhouse]. It’s one of the brands with the fastest sell-throughs for us. Gianvito Rossi has done an incredible job.
RFH: Charlotte Olympia is brilliant for the international customer. She made embellished flats cool. She stands out, moves with the trends and is highly recognizable. You would know a Charlotte Olympia shoe anywhere. Valentino has become huge. They very much understand the consumer. They create exclusives all the time, they listen, they are fast-moving, and they are brilliant in their production. They will be one of the biggest brands for us in Harrods and Selfridges in a couple of years.
How has the men’s market evolved?
NC: The luxury sneaker has changed the landscape in men’s footwear, whether you’re talking about Giuseppe Zanotti or Givenchy. It’s 50 percent of our men’s business, whereas it was 5 percent a few years ago. Overall, men’s is 25 percent of the company now.
RFH: The celebrity factor is as big in men’s as it is in women’s — and sometimes it [translates more quickly]. If Kanye West wears a shoe to a show and it’s been Instagrammed, our male customer wants that shoe the next day. It’s very cultish in that way.
One major move within your own product roster has been to broaden your price points with the more-moderate Miss KG line. What was the thinking behind that debut?
NC: Even though we’re the second-biggest shoe company in the U.K. [by sales] — Clarks is the only one bigger — our average price point is 120 pounds [$192]. The average price point of [shoes sold in the U.K.] is 30 pounds [$48]. A huge amount of people loved what we did but couldn’t afford to buy into it.
RFH: The youth market is a huge part of fashion in the U.K. It’s what we’re particularly good at as a nation. These kids buy fashion like I buy coffee, and their addiction for trend has never been more powerful. They’re influenced by celebrities, the Internet, social media and the desire to show off. If you’re 19, being able to feed that addiction on a weekly basis was almost impossible at our prices. We realized there was this gap, and we also realized proper shoe retailers weren’t addressing it. It means you can push trends even harder. Some of our most creative product is now in that area. But it requires different factories, a whole new sourcing strategy and a different path. We recognized it wasn’t a skill set we had here, so we employed a new team of people.
How much new business is the collection driving?
RFH: It’s already the second-largest brand we own. We’ve doubled our target market with a new stream of wholesale clients such as Next, one of the biggest public retailers in the U.K. We’ve become Asos.com’s biggest shoe brand. The trajectory is amazing.
Across your labels, you’ve added more design talent in the last few years. Why is that so important?
RFH: Design is the key to everything. I’ve added 12 people to the product team [this year alone]. We’re making our big investment, and our collaboration with Cordwainers and London College of Fashion is helping a lot with that.
In today’s world of copycat design, how do you keep your own brands looking distinct from the high-end lines you buy at the luxury level?
RFH: Clearly, we are in a lucky position because, as a company, we get to see trends all the time at the fashion weeks. But our teams are completely separate. I never rip anything off, and I won’t buy other people’s rip-offs. I have a professional relationship with the [high-end] brands. We have a responsibility to protect them.
Under Jones, you planned rapid retail expansion in the U.S. market but have since shuttered your doors. What didn’t work?
NC: It was too early. The locations [we opened] weren’t great, and we were trying to run too fast. You think you know a lot about New York, but you don’t. There wasn’t enough traffic on Bleecker Street for us to have a store there. The other two [shops] in Costa Mesa, Calif., and San Francisco were weak locations that were previously loss-making stores for Jones. We had to make a decisive move because you don’t want to be drifting onward with a lack of strategy when losing money. Private equity has taught us that you can’t hope things are going to get a lot better if they aren’t great. We will open again when we’re ready and 100 percent confident on the locations.
At the same time, your wholesale business in the U.S. is growing. To what do you attribute that?
RFH: Kurt Geiger London — our highest-priced, made-in-Italy brand — has suddenly gotten huge celebrity traction. Our “B” series of Britain and Bond styles have gone berserk. Kate Bosworth, Kate Beckinsale and Beyoncé all wore them within 24 hours of each other in one week. We were doing our shoe market in August, and Bloomingdale’s came in and knew all about our celebrity placement, and we launched five doors off the back of that. We’re on Zappos.com now, too. The shoes are also very strong at Lord & Taylor and Nordstrom.
What other markets are ripe for expansion?
NC: Next year will be about Asia. We opened in Beijing and Shanghai with our franchise partner, the I.T Group in Hong, and we have big plans for expansion there. We are very sharp in pricing and believe that white space of about $250 is a good place to be. We’re moving into Bangkok and South Korea, and we have a great business in Australia. The Middle East is already successful. Our international store count will be on par with our U.K. doors by the end of 2015.
How important is the growth of the online business?
NC: It’s our single-biggest profit center. Our Web business is back in-house, and we have total control, which we didn’t have under Jones. Today, we’re 50 million pounds [$80 million] a year online and will double that in the next three years. Twenty-five percent of the business is mobile. How much easier is that than going to the shop, taking off your shoes and trying them on? You can buy a shoe by the time you’ve had one stop on the tube.
RFH: Click-and-collect is a game changer. You buy it online and pick it up in the store. It’s a real pain getting deliveries at home, so it’s been a big thing here for the last 24 months. What that means is that you get people back in your stores, and your traffic and volume are going up.
Are you always thinking about your next deal? Who would be your ideal owner?
NC: We’re in private equity, so we’re going to be bought at some point. We’re just happy now with someone who has big ambitions for the company. It doesn’t matter whether it’s private equity, a strategic partner or a rich billionaire. We feel quite young and don’t want to do anything else. We love the company and we love success.