The Adams Childrenswear chief executive admits that the business was broken when he was brought on board, but he is determined to come up with a long-term fix by turning the retailer into “Topshop for kids”.
When John Shannon bought kidswear group Adams Childrenswear and appointed David Carter-Johnson as chief executive in February last year, Drapers, along with a large chunk of the clothing industry, was sceptical about his chances – or inclination – to do anything more than a bit of clever financial engineering and a cosmetic flip or break-up sale. Most did not expect him to start digging the trenches and wade in for the long haul.
Carter-Johnson, says that market reactions to the acquisition surprised him. “John owned footwear chain Stead & Simpson for almost eight years. He is not an in-and-out merchant, that’s not his style,” he points out.
Shannon wrote a personal cheque for just under £15 million to secure the business. He says: “It was just two weeks from me hearing it was on the market to me buying it. I was in a position to finance the deal myself and it was a great opportunity to buy a strong brand.”
What he got for his money was the Adams Kids chain with 260 UK stores and concessions and 116 international franchise stores, plus the Mini Mode brand with its exclusive 330-store distribution in chemist Boots.
But even Shannon, who is now chairman of Adams, admits that what they took on was a broken business. For Carter-Johnson it is his second stint at the retailer. He was managing director of the company from 1982-91, during which time sales increased from £10m to £130m and profits when he left were £15m.
The pair set about restructuring the management team and re-engineering the cost base. Adams had two head offices in Nuneaton in Warwickshire, which has been slimmed down to one. In addition, 70 unprofitable stores were closed. In all, the pair stripped out £27m of costs. Shannon says: “This was all the low hanging fruit and there was plenty to go at. We discovered that £1.7m was spent on cardboard to deliver window and in-store graphics – something we felt was doing the stores little justice. But the real challenge for us is the work we are doing to rebuild the UK retail business and the profile of the brand, and that’s not a short-term fix.”
It certainly isn’t. The UK kidswear market is dominated by the supermarkets and the value chains and as such is price-led. Much of the scepticism surrounding Shannon’s buyout of Adams was about whether there was a place in the UK any more for a mid-tier kidswear specialist.
Carter-Johnson is firmly of the view that there is, as long as the brand’s positioning and profile is spot on and differentiated from the competition. He says: “We looked at the brand’s profile in the market. We needed to rethink the positioning as it sat just above the value sector (Tesco, Asda, Matalan, Primark and Peacocks) in terms of fashionability, when it should sit in the fashion sector with the likes of Debenhams, Next and Zara but come in just underneath them on price.”
Work on fashionability at the company is well underway. Carter-Johnson brought in Lindsey Williams, who was head of womenswear at River Island for a decade. Her appointment, he says, was all about injecting a real understanding of fashion into the business. “Lindsey also brought a real breath of fresh air in terms of internal attitude to change and the suppliers. She had no direct experience of kidswear and that actually worked in our favour. I don’t think we would have been able to achieve what we have on product in such a short time with a kidswear person. She wasn’t hung up on what you can and can’t do in kidswear, not just in terms of fashionability, colour and product, but also in terms of what you can get out of a supply base. She has a real can-do attitude.”
He adds: “We used to have a design office in London because the previous management team said it was impossible to get designers to work in Nuneaton but that’s a luxury we couldn’t afford and a myth that was exploded. All our designers are at Nuneaton and our design has improved dramatically.”
‘Kids love fashion’ is the new mission statement for the business and Carter-Johnson is keen to stress that anything that doesn’t resonate on that level has no place at Adams today. “Our gift buying has been cut right back. When we took the business over we had just had delivery of a huge buy of bubble machine makers, which were effectively toys. That made no sense to us. The test of what we do is in the new mission statement. If it doesn’t feel as though it belongs to that statement then we won’t do it.”
As a result, gifts and accessories are all tied into key fashion stories of the season. Icon, Adams’ accessories supplier, now gets the story boards from the design team so they can deliver the appropriate matching add-on purchases into the store at the same time as the ranges. Girlswear is the biggest category and accounts for 28% of sales, babywear is about 25% and boyswear 22%. The rest is split between footwear, accessories and nightwear.
It wasn’t just fashionability that was a huge issue for Adams. Ranging was also a minefield of over-duplication across product category and age ranges. Carter-Johnson explains: “We had an age overlap which we have fixed; now we have nought to 24 months as baby and two to 10 years across girls and boys. I don’t think there is a right or wrong way to do it. Next do it differently from us; what’s important is that the customer understands it.”
Adams has also worked hard to reduce options across the business, slashing them by 20% every season for the past three seasons, something Shannon says will make a big difference to profitability if it can improve sell-through. “It means we can get the same or sometimes more sales from less stock, which cuts down on costs. If we get product right and it sells at a premium, it offers us a better margin.”
Better buying and stock management has also been a big focus for the duo. Shannon says the business is running on £10m less stock than at this time last year. “The most important thing for the business is to get sell-through north of 60%,” he says.
Prior to Shannon buying the business it was below 40%, but Carter-Johnson says he recognises that in what is only going to be an increasingly more difficult market the business will have to be sharper on price. Prices across the business are 10% less than last year.
The good, better, best price architecture has also been worked out. Carter-Johnson cites denim as an example of where the business has reduced options but still been able to offer better value and choice. “We have an entry price jean at £5.99 but we also have a more worked up version for £8.99, and an all-singing all-dancing one for £12.99.”
The number of promotions has also been scaled back, as the management believe they were devaluing the brand. “The whole store was more or less on Sale most of the time,” says Shannon. “Now the business is running on 12 weeks stock rather than 20 it is not as necessary to have such a promotional stance.”
The biggest project at the end of this year, now that Carter-Johnson and Shannon feel happier with the retailing nitty-gritty and the product offer, has been the launch of a new Adams Kids store concept in a shopping centre in Lewisham, south London, in mid-September. The Adams team worked with London design and branding consultancy Bureau to come up with the store design. They chose Lewisham because the centre has TK Maxx, Next, Primark and Matalan.
The shopfit is different from the old Adams Kids stores, which are more traditional, with wood-effect flooring and snakes and ladders floor mats. Carter-Johnson says: “This store is about modern kids’ values. For example, the changing room has a celeb theme with a paparazzi graphic.”
The shopfit is intended to be as flexible as possible but key to the new look are front- and side-facing fixtures that aid shopability. Across Adams’ retail portfolio the business has stores ranging from 950sq ft to 4,000sq ft but Shannon says the optimum store size will be around 1,500sq ft in small towns, 2,000sq ft to 2,500sq ft in medium towns and 2,500sq ft to 3,000sq ft in major shopping malls and cities.
For example, its store in the Westfield London mall in White City, west London, is 2,800sq ft. There are still areas that the internal and external teams need to work on with the new concept store but early signs are encouraging, as in the first three weeks of trading sales were up 27% like-for-like in the refitted Lewisham store. Carter-Johnson believes he can engineer costs down to around £30 per sq ft for a roll-out. The business wants to roll out 25 new stores and concessions and undertake a significant store refit programme.
All this is positive progress but both Shannon and Carter-Johnson know that the best-laid plans can be wrecked by events out of anyone’s control, and the current trading climate certainly has the potential to do exactly that.
Carter-Johnson describes like-for-like sales as erratic. “The majority of the stores are profitable. We discarded the serious loss makers – that is a great place to start from but we are talking about a company whose turnover has shrunk for four consecutive years. We know we have a long way to go to reach good retailing standards. Changing benchmarks for the team and raising the bar, for example in terms of rates of sale, are key,” he says.
The pair are realistic about the prospects for UK growth with an aspiration for moderate expansion but much better profitability. However, international growth is a different story and one that they feel offers key opportunities. Carter-Johnson says: “If you translate our international business into retail sales it would represent 25% of turnover. Obviously in real terms it’s a lot smaller than that as we sell the stock to our franchisees on a wholesale basis, but the figures are useful to see in that way to give an idea of why it is such a fast-growing area of the business and one which we think has fantastic potential.”
Adams has 116 international stores. It has opened three stores in India this year and a Mini Mode store in Jeddah and Riyadh in Saudi Arabia.
Despite the oncoming recession and the difficult niche Adams has to carve out for itself in the kidswear market, Shannon and Carter-Johnson are upbeat. They have the advantage of having traded through downturns before.
Carter-Johnson says: “We know this is a huge task. But the business has unlocked potential and kidswear is pretty much recession-proof – children grow and need clothes. When people refer to Adams as Topshop for kids I’ll know we have done our job right.”
2007 Chief executive, Adams
2005 Various consultancy roles
1998 Managing director and chairman, Boxfresh
1991 Managing director, Fosters
1982 Managing director, Adams
1979 Divisional buying controller, Debenhams
1974 Departmental merchandiser, Edgars in South Africa
1967 Senior buyer, Clarks
Who do you most admire in retail?
It has to be Sir Philip Green. He is the modern day Sir Charlie Clore [founder of the British Shoe Corporation, which later became Sears]. It’s all been said before but Philip is a fantastic merchant and trader. His energy and vitality is exceptional. When he sees an opportunity, he seizes
it. The empire he has built in the past decade is testament to that. People are afraid of Philip’s muscle in the market in the same way they were of Charlie Clore’s.
Which is your favourite retailer?
Selfridges. I am a regular customer; I think the ground floor and first floor fashion departments are exceptional. It is extraordinarily well segmented. If you are a man, of any age, you can find what you are looking for on the first floor. The choice of brands and the range of offer is fantastic. I love visiting the shop-in-shops – my last purchase was a birthday present which was a tie from Herm賮
What has been your proudest achievement?
My stint at Adams the first time round when we built the business from £10 million to £130m and left it with 12% EBITDA. At that time it was probably the most profitable company within Sears with the exception of Selfridges.
What is the best-selling product you have ever worked on?
There are probably better sellers but the one that sticks in the mind was a Boxfresh parka which sold 500 units in the London Covent Garden store. I saw those parkas a lot while walking around London.
What would be your dream job apart from fashion?
I would be a racing skipper on a 30-metre yacht – the bigger the better. I do sail competitively at the weekends but in much more modest vessels.