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Drew Walker

After a tough few years, classic UK knitwear brand John Smedley has bounced back with ambitious sales targets and plans to grow the brand overseas.

Drew Walker, managing director of fine knitwear company John Smedley, is in a bullish mood. On a sleet-grey winter morning, Drapers meets Walker and creative director Dawne Stubbs for a working lunch at the company’s HQ in Matlock, Derbyshire. Both are brimming with plans after what appears to be the end of a rocky few years.

In the words of Walker, the 223-year-old business “hit the buffers” in 2001 and 2002, losing about 20% of its turnover when M&S - one of John Smedley’s major customers - took its yarn manufacturing off-shore.

As well as this body blow, the product range lost its way. Walker admits the company’s knee-jerk response to the crisis instigated by M&S’s new outsourcing policy was to attempt to design its way out of the problem. He says candidly: “We lost our way because we were desperate to increase our turnover. We expanded our range by about 30% - it was a reactive policy. There was no focus, too much stock, and sales started to fall. We had become staid, boring, predictable and rather safe.”

The figures tell their own story: in 2000, John Smedley turned over £13.4 million against a pre-tax profit of £652,491. Two years later, sales had risen slightly to £13.8m, but the company posted a pre-tax loss of £426,992 - a figure that slumped further in 2003, to a loss of £862,628 against turnover of £12.1m.

The problems extended to the high street. In 2000 the company opened its first store in London’s Brook Street, followed by one in King’s Road a year later, only to close the latter after two years. Walker blames high overheads and an unsuitable location for its demise.

This was the landscape Walker inherited when he was promoted from operations director to managing director in 2002, and he admits that one of his first tasks was a “fairly severe reappraisal of where we were”. While he is reticent about the full extent of the fall-out, he is less secretive about the huge effect that those years had on the business. “It was very difficult. We made about 50 redundancies - a huge number for us,” he explains.

The dip prompted immediate action. Walker says John Smedley went “back to basics” in 2003 by slashing its product range by 30%. By 2004, the company was back in the black, posting a pre-tax profit of £221,892. By 2005 this had climbed to £474,024, on sales of £13.3m. But Walker admits margins are still too low: he would like to raise the return on overall sales from 5% at present to 10%.

One of the key reasons for the firm’s recovery is the decision to bring the creative function - which had been outsourced to cut costs - back in house. As part of the shake-up, Stubbs rejoined the business after an 18-month break to have children, taking on the role of brand manager with a brief to steer the design and direction of the collection.

Walker clearly thinks highly of Stubbs, attributing at least some of the company’s recovery in the past few years to her flair. “For a brand, outsourcing your design isn’t a good long-term strategy,” he admits. “We didn’t have the creative spark a brand needs, and we had become formulaic and staid. We needed creative direction. We had incredible strength in manufacturing and accounting, but were missing the essential ingredient of creativity. Dawn completed the circle. She took our core strengths - brand recognition and quality - and made them much more interesting. She rejuvenated the emphasis on colour and started to add her own structured designs.”

Three years later, the fresh focus on design appears to be paying off: sales for spring 07 are up 15% in volume year on year. Last year’s financial performance is likely to be “OK”, says Walker, while 07 will be “wonderful”.

For consumers, words such as “classic” and “traditional” inevitably go hand in hand with the John Smedley name. Sue Tahran, owner of American Retro, one of the 100 UK independents that stock the brand, says: “It’s a quality product. People know and recognise the name, and once they’ve tried it they come back for more. It has a great following - people keep John Smedley products for years.

“The company is fantastic to deal with and quality control is good. I have been to the factory to look round, which is a very unusual thing do be asked to do - but then again, how many British manufacturing companies are there left? At the store, we make a point of talking people through the collections to make it clear why they are more expensive. People are always impressed by the fact it is British.”

Despite the brand’s classical heritage, Walker and Stubbs are quick to throw in words like “directional” and “aspirational”. So is it difficult to present a fresh, contemporary front to such an established brand?

“Not in the slightest,” answers Walker without hesitation. “You can be innovative and creative; the secret is to do it subtly. You can play very interesting games with form, fit, colour and shape. We have made the transition from being a manufacturing-led business to being design-led.”

The website also stresses the contemporary angle, pointing out the association with new James Bond actor Daniel Craig: the star wore a black John Smedley roll-neck and V-neck jumper in his debut role as 007.

The brand’s ethos is pretty straightforward: it is all about fine gauge knitwear produced from the best raw materials, made mostly in England, and aimed at discerning customers with money to spend. The company’s New Zealand merino wool is 19.5 microns or finer and is produced by nominated wool growers on the South Island, while the Sea Island cotton is breathable and “unprickly”. Words such as quality, detail and traceability are used liberally, and these are undoubtedly the values for which the company is renowned.

But Stubbs is also at pains to point out the versatility of the brand’s range. “We can supply any style, in any colour. We have a very loyal consumer; our clothes wear well and look good for a long time,” she explains.

Staple menswear lines include the classic polo shirt and V-neck, while roll necks, crew necks and cardigans form the backbone of the womenswear collections. Every year, two new seasonal ranges are introduced in both womenswear and menswear, while tried-and-tested styles are tweaked constantly, with new shapes, patterns and fibres added.

Unsurprisingly, classic colours are key: black, navy and charcoal comprise 40% of the range. For spring 07, silver grey and chocolate are strong. Stubbs says: “It’s an evolving palette: we try to create colours that are warm and rich, as well as classic, and that look beautiful for our product.”

Despite - or possibly because of - the brand’s strong classic roots, Walker is optimistic about scope for future growth. Autumn 07 will see the company dip its toes into the accessories arena, with a new range covering menswear, kidswear and womenswear in scarves, hats and gloves. At the same time, there will be a small kidswear collection, Little One, that will comprise four lines. Walker describes the range as “mini-me”: smaller versions of existing adult styles.

It’s difficult to pin Walker down to an average customer age; this, he says, is “anyone who likes to wear a quality product that lasts well and looks good”. For men, this encompasses those aged between 22 and 52 “and beyond”; for women, the range is younger, mainly because of its youthful Japanese market.

The next few seasons will see a fresh focus on womenswear, the aim being to bring the product range in line with menswear. “We’re missing out on the 65-plus female consumer and there’s a huge opportunity in the UK to do this,” says Walker.

At present, about 97% of John Smedley’s product is made in the UK, while the remaining 3% - specifically, the company’s cashmere and heavy knitted garments - is sourced from abroad. About 2% of this comes from China, the remaining 1% from Europe. The 450 staff, based on site at Matlock, help to produce 500,000 items a year, 70% of which are for export within Europe and the Far East.

The company is meticulous about its manufacturing process: each piece is scoured or washed using water from John Smedley’s three springs - a crucial stage that Walker says gives its clothes their characteristic soft feel. Each piece then goes through three stages of supervised pressing to ensure fit and shape, before the neck trims, buttons and labels are applied by hand. In total, there are about 35 finishing operations involved in making a single garment.

Understandably, Walker is evangelical about the brand’s home-grown manufacturing heritage at a time when most of the industry has outsourced. “We manufacture everything we can here - however, that doesn’t include hand-knitted products. I believe that it’s a philosophical decision.

“Also, the economics don’t stack up. We will never replace short-term gain for long-term gain. Of course you could make more money in the short-term [by outsourcing], but in the long-term your brand would be jeopardised. So much of our brand comes back to being made in England. We have an obsession with raw materials and attention to detail.”

Walker says one of the most frequent questions asked by customers in the company’s London store is where the products are made, and the focus on UK manufacturing clearly contributes to a fiercely loyal customer base. A reader named Tom, who posted a comment on Drapersblog.com following a recent report about Drapers’ visit to John Smedley, says: “It is good to see a realisation that £100 is not a lot of money for a well-crafted garment. As a long-time Smedley addict, I believe the brand offers excellent value for money. Consider that the £50 high street ‘luxury’ cashmere made in China is often made with poor-quality yarns, badly made and finished, and can be environmentally damaging.”

To reinforce its UK pedigree, John Smedley launched its Made in England campaign in autumn 06 - an ongoing marketing drive to cement the brand’s genuine home-grown value. “It is also because there are so many people who pretend their label is made in the UK,” says Walker. “We wanted to state the obvious and say this is what we’re about.”

The company is one of the local area’s biggest employers. Most of the staff hail from a 10-mile catchment area, and some have followed several generations of their family into employment at the firm. Walker claims to know all 450 staff members by name - a feat made easier, he says, by a flat management structure formed of four directors and a clutch of managers - and also boasts that the 8% labour turnover figure is world class.

Yet that still leaves 35 staff members to replace every year; a task he admits can be tricky. “There’s no encouragement to come into manufacturing or textiles. We have a dynamic industry that embraces change, yet we still fail to get that across to the outside world.” But when new blood does come into the business, “people love it and stay forever”, he says.

For the future, the company clearly has an eye on both international and domestic growth.At the moment, 30% of sales come from the UK; 30% go straight to Japan, a market that revels in the brand’s English heritage; and about 40% of sales come from other countries in the Far East, the US and Australia. Russia, China, South Korea and Eastern Europe are all seen as fast-growing markets.

Back in the UK, Walker is pinning his hopes on PR to push the brand’s profile, appointing a PR firm two years ago to spearhead the push. “PR activity is a big voice for us,” says Walker. “We want to heighten consumer awareness of the brand, creating more demand, which will help retailers sell more.”

Raising awareness will also be a focus on the retail side: with more in-store training, more point-of-sale material, and more opportunities for factory tours of the site. Walker is eager to emphasise that the brand’s recent struggles are over, and his enthusiasm for the company’s values and product range is almost tangible.

Plans to boost turnover are ambitious in anyone’s terms: Walker would like to see 2006’s predicted turnover of £14m rise to £20m within four years. He is aiming for both UK and international growth, and aims to expand burgeoning lines such as accessories and kidswear.

If the company can stay focused on its home-grown values, while keeping the range fresh but traditional, there is every reason to share Walker’s confidence in John Smedley’s future.

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