The Bookseller has published a column I’ve written in response to WH Smith’s prelims announcement last week, which delivered the double whammy of £100m+ profits, and the upcoming departure of Kate Swann as Group CEO. I’ve reproduced it below.
When the WHS announcement was made last week, two sets of instinctive responses crashed into each other. The City reporters raised the roof for Queen Kate, during whose reign earnings-per-share have been driven to ever higher peaks, thanks to a combination of margin enhancement, cost-cutting and share buybacks. And the naysayers pointed out that, yet again, sales were down – even in the go-go Travel division, like-for-likes keep falling. Oh, and BTW, the store environment is pretty poor.
I try to take a slightly more nuanced (or reflective) view. Swann has delivered extraordinary numbers through torrid times, but has she left her heir apparent, Steve Clarke (who is promising more of the same), with a sustainable model?
WH Smith has made every decision with its shareholders’ interests paramount – and that’s as it should be, am I right? However, it is hard to escape the conclusion that those decisions have been predicated on short-to-medium term returns, rather than the sort of long-term investment that leading retailers make. WHS is still a bricks-and-mortar company (notwithstanding a long-standing but rarely promoted transactional site, and the slightly more forward-looking Funky Pigeon online offer), trading in categories – printed books, newspapers and magazines – that are in long-term decline. Its overseas Travel expansion plans are broad-based – but winners need to be idenified from a pot-pourri of investments across several continents.
Retail Week has just dropped through the door, complete with a profile of Steve Clarke. In the meantime, here’s The Bookseller piece:
Cannon Street Station is a National Rail terminus in the City of London, bringing commuters into the financial district from south-east London and Kent via London Bridge. It’s busy for an hour or two each morning and evening, but outside of these times, and at weekends, it’s dead. In 2010/11, it served 21m passengers, which sounds like a lot, but compared to Liverpool Street (56m), let alone Waterloo (92m) it isn’t a big number – around 40,000 people each rush hour.
It’s recently been redeveloped, with plenty of handsome new office accommodation on top, but this somehow served only to emphasise how empty everything underneath was, when I visited at 2:00 on a weekday afternoon.
Compared to other mainline stations, the retail offer is negligible, but interesting. Cannon Street is home to the first Relay convenience store in a UK railway station. It’s owned by LS Travel Retail, part of the Lagardère Group, which is a huge presence in travel retail in mainland Europe, Asia and America, but has only arrived in the UK this year with the Relay CTN and Watermark bookshop brands; they also operate Lonely Planet’s Manchester Airport store, and have multiple specialist fascias in their portfolio.
Relay is a brand consumers will have seen in dozens of European airports, so it looks familiar, but out of place. The store is small (pretty tight, in fact) and neat, with the right ranges of newspapers, magazines, on-the-go food, confectionery and cigarettes, and small selections of grocery staples and books. There’s nothing remarkable about the offer, but the shopfit is bright and inviting, the staff friendly, and everything is clean and well-ordered.
The tube network has many independent CTN offers, but mainline stations tend to be the province of the WH Smith Travel division. It’s interesting that Relay secured this site instead of WHS…
…but not half as interesting as taking note of what WH Smith has done instead.
Smack-bang opposite the station entrance, on the north side of Cannon Street, there’s this:
Not the prettiest thing you ever saw, but take note: it’s clearly bigger than Relay, and it boasts two supporting brands in Funky Pigeon, WHS’s wholly-owned cards and gifts business, and Costa Coffee. That coffee offer alone should be enough to get commuters across the road from the station – even though Costa Express means that you get self-service machines, rather than a smiling barista:
Plenty of room for customers too. The store has a rear-facing dogleg, which permits a sizeable Funky Pigeon range, in addition to WHS’s regular Travel fare:
The timber floor, clean lines and bright environment all create a very inviting environment. They also put one in mind of an old song:
There is no doubt that competition causes incumbents to up their game, and that’s certainly the case with WH Smith in Cannon Street. Over to LS Travel Retail for the next leg of the Relay race…
Cannon Street image: e-architect.co.uk
Clinton’s new Chief Executive Dominique Schurman has spoken to Retail Week about her plans for the brand, following her appointment by new owners Lakeshore Lending, a subsidiary of Clinton’s largest creditor and supplier American Greetings.
Schurman has enjoyed a thirty year career in card and gift retail in the US, where she will continue to serve as CEO of Schurman Retail Group, which is part-owned by American Greetings, and comprises the Papyrus, Carlton and American Greetings shopfronts and online sites.
Adding 397 well-worn UK stores to this mix is a tall order, and Retail Week concentrates on three elements of her short-term strategy thus:
1. Renegotiate lease terms out of administration. With retail chains falling like flies, landlords will be interested in reducing rents to secure tenancies, particularly in the sort of secondary mall locations that Clintons has historically filled – locations that are less attractive to fashion users.
2. Refurbish the stores. The extent to which Clintons had allowed its estate to go to seed looks like a long-term death wish – either that, or simple disdain for customers and competitors. The design of the typical Clintons store – inside and outside – has moved on very little since the 1980s, as the business became captive to its own heritage. And maintenance has been poor: carpets are tatty, and fixtures and lighting well-worn and out-of-date, creating an ambience of “downmarket without the value-add”. It is hard to see how you just freshen up these stores – they will need to be gutted and started again.
Schurman has indicated that she will drop the chain’s signature orange. I’d think hard about the name, too; “Clinton Cards” has had out-dated connotations for a long time, and though it never quite shot itself in the foot (cf Gerald Ratner), it’s become a brand for which there is little consumer loyalty. The store and online offer is going to have to be completely reinvented – why keep the old name, when you could do a Next-out-of-Hepworths, or River-Island-out-of-Chelsea-Girl, and properly reposition your business.
3. Improve the product mix. Clintons is another middle-market retailer that has fallen between the two stools of value (personified by Card Factory) and designer/quality (think Paperchase or Scribbler).
This is likely to mean a broader spread of gifts. What does Schurman sell in her US businesses?
In addition to cards and stationery, upmarket brand Papyrus offers photo frames and albums, bags and purses, soaps, books and bookmarks, candles and diffusers, mugs, glasses and tableware, entertainment products, jewellery, scarves, journals, toys, games, plush and much more; Schurmann’s other brands provide mid-market ranges of similar products.
The US has a greater appetite for printed invitations and formal partyware than the more casual Brits, and this is reflected in the offer. It also memorialises public holidays to a greater extent. We do birthdays, Christmas, the spring seasons (Valentines, Mothers, Easter, Fathers), and a few personal milestones. We don’t send a lot of cards celebrating Halloween or New Year, we’re disdainful of industry-created opportunities like Bosses’ Day, and – for instance – we express our patriotism rather differently to the US (did you receive any Diamond Jubilee cards?). There’s no market for UK versions of the 4th July selection at American Greetings’ website, however keenly we support Help for Heroes.
Of course, it’s too easy to point up how we’re divided by a common language etc etc, but Schurman’s team will need to quickly recognise how different our attitude towards each other can be, and how this affects our preferences in cards and gifts.
All of the above will cost a lot of money, and a reinvention of this sort cannot be delivered overnight – American Greetings will have to run fast to deliver store prototypes and revised ranges for next Christmas. And Schurman will of course have to address Clinton’s unexciting online offer, out-manoeuvred by Moonpig and prey to WH Smith’s new Funky Pigeon brand.
As a manufacturer and supplier, as well as retailer, AG will have to manager its supplier relationships with the supermarket chains, who are muttering about boycotting AG’s cards. It would be counter-productive to save Clintons (at significant short-term cost) in order to lose long-term supermarket business.
Similarly, Clintons has important retailer relationships with AG’s direct competitors, like Hallmark. Much triangulation will be required…
So, what’s the endgame? – a long-term presence as a retail owner in the UK, or a turnaround and exit in the course of the next five years? While it’s good news that nearly 400 stores (and the jobs that go with them) have been saved, can profitability be grown at all of those locations? And if you were setting out to build a 400 store chain, how many of these locations are the ones you’d choose? This is not a quick-fix business.