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Keeping Faith in the future

Faith is on the blocks after its banker put the footwear chain on the market. Where next for the troubled footwear retailer?

In 2004, Faith was at the top of its game. It was to footwear what Jane Norman and River Island are to fashion – focused and with a USP. As well as attracting a bidding war between private equity funds before eventually being sold for £64 million to Bridgepoint Capital, Faith regularly topped the seasonal Drapers High Street Hit or Miss footwear surveys for having the best product for its target audience.

Earlier this month, Barclays appointed FTI Consulting to sell the business after rejecting a debt for equity offer from Bridgepoint plus an £8m cash injection from the private equity firm. Bridgepoint had already been forced to refinance the business to the tune of £15m because of sliding sales, and the business has racked up losses of £12.5m over 2006 and 2007. Numbers that aren’t easy for either Bridgepoint or Barclays to stomach.

The Faith management team – chairman Steve Cotter and managing director Steve Swaby – responded by appointing corporate advisory firm Baker Tilly to help them find a backer to buy the business themselves, in the belief that the business does indeed have a future on the high street. As Drapers went to press the pair were understood to be having talks with four private equity firms.

Almost immediately after the 2004 buyout Faith’s trading took a turn for the worse. The exit of Jonathan Faith, the chain’s hugely influential founder, following the Bridgepoint deal was always going to be difficult to manage. Jackie O’Neill, who had been at Faith for more than a decade, and Paul O’Neill, the retail operations director, were installed to lead the business – Jackie as managing director – and Bridgepoint bolstered the management team with the appointment of a new buying director, Mel Serpen, who had previously headed up women’s footwear at River Island. Serpen’s tenure was short-lived though, and she left less than a year later after a disagreement over strategy.

What followed was a prolonged rocky period for the retailer. It lost its distinctive product handwriting, made crass buying errors leaving its warehouse stacked with boots, and its formulaic white box store format was left behind by the likes of Dune and Kurt Geiger, which brought swanky new luxe fits to the sector.

In March 2006, Bridgepoint was forced to refinance the business.

However, Faith’s struggle to secure consumer spend has been as much about the changing shape of the footwear sector as it has mistakes at head office. In the past four years, New Look, Primark and Topshop have all made great strides with their footwear offers, accelerating price deflation and increasing shopper choice. New Look has overtaken Clarks to become the largest women’s footwear retailer by volume, which it has achieved just eight years since introducing the category in its stores.

One rival retailer claims that Faith was too slow to react to the changing marketplace. He says: “It’s almost a case of too little too late. Sales fell but still there was no investment in stores to help it fight back against clothing retailers. The ranges lost their edge and were overtaken by rivals who are cheaper. The likes of Dune saw it coming and switched positioning, moving further upmarket.”

It is not just Faith that has been knocked by intense competition. Last year, Clarks shut down its Ravel chain claiming it could no longer compete and that was followed this January by the collapse of Dolcis and Stead & Simpson. The Dolcis brand name was subsequently rescued by Barratts owner Stylo, shortly after it shut down its own Shellys chain, while Stead & Simpson was bought out by Shoe Zone.

The arrival of Steve Swaby initially as brand director from footwear supply group Browning and its associated retail chain Dune, to head up product and brand image, last year did bring about a fresh direction for Faith. Swaby joined executive chairman Steve Cotter, who had been drafted in by Bridgepoint to replace Jackie O’Neill and initiate a recovery in 2006, and the pair set about repositioning Faith to target a more sophisticated shopper with slightly pricier products.

Late last year, Cotter told Drapers that performance had improved and the chain was in line to turn in a profit. However, almost 12 months on from the launch of the Swaby/Cotter new store concept in Exeter (pictured), which has seen double-digit sales increases against the rest of the chain, only a handful of shops have received the treatment and reports around current trading are patchy. Industry sources claim management have been frustrated by the lack of investment in the business, but given the chain’s trading history it is unsurprising neither Barclays nor Bridgepoint have been willing to stump up additional cash.

On top of the slow roll-out, rival retailers say that Faith’s product development has been held back by its suppliers, some of which have demanded pro-forma payment for goods because they have been unable to get credit insurance. One source says: “That limits your options. There may be situations where you are forced to work with one supplier simply because they don’t demand payment upfront. But then is that the best product you can buy? Paying upfront also has huge implications on cash flow.”

Undoubtedly Faith’s problems run deep, and apart from Swaby and Cotter’s attempt to garner new private equity backers there seem to be few takers for the business. Sources told Drapers that one prospect would be an overseas player or a Far Eastern supplier looking to enter the UK retail market.

Rival footwear retailers told Drapers that the Debenhams concession operation was of interest to them – Faith has 116 concessions within the department store chain – but that the high street stores were almost unworkable. However, sources close to Debenhams say it is largely unconcerned by the possibility Faith could disappear and that it could easily switch to an own buy proposition rather than looking for another partner.

One managing director of a footwear chain says: “Faith lost its huge concession business within Topshop a few years ago and Jonathan’s answer to that was to sign leases on lots of shops. Rising rents have meant some of these shops are now unworkable for it.”

Another retailer adds: “Office does sales of £100m a year on about 77 stores and turned a profit of about £4.5m last year. Faith has sales of about £90m but it has about 80 stores and 116 concessions – double the number of outlets against Office but significantly lower sales. It just isn’t turning over enough to be a viable operation.”
Another director of a footwear chain says: “You’d have to put on £10m sales at least. And where are you going to get £10m sales in this climate and with this level of competition?”

Although Faith may lack sales, the brand itself retains huge favour with shoppers. It regularly wins “best footwear” awards from consumer magazines and despite its disappointing ranges, shoppers don’t appear to have abandoned it all together. The footwear chain managing director says: “Shoppers are forgiving – if you could get the right product in there, they would be back.”

A source close to Faith adds: “The problem is Faith continually tries to be all things to all people. Yes, Faith should be able to serve teenagers through to 40-year-olds, but it still needs to have a Faith handwriting.”

Despite the challenges Faith faces, not one person contacted by Drapers believes the brand will disappear altogether. One chief executive says: “Perhaps it could come back to the market as a wholesale brand.”

Other industry figures called for Jonathan Faith to mount a bid for the business, in the belief that his understanding of the Faith shopper could bring an instant fix. However, this would seem an unlikely outcome given he is now focused on charity work and the development of stock management systems.

One chief executive of a footwear chain says: “It’s a tough time to be selling a business. The banks haven’t much appetite for retail, especially in footwear because of the high-profile collapses earlier in the year. This is one deal that is really hard to predict.”

Faith Figures
£64m: The price Bridgepoint paid for Faith in 2004
£25m: The amount owed by Faith to Barclays, its bank
41.8%: Market share of the footwear specialists in 2007, down from 48.3% in 2002
29.6%: Footwear market share owned by clothing retailers, up from 24.4% in 2002

Readers' comments (1)

  • In my oppinion Faith has been mismanaged since the take over of Bridgepoint. The range has been poor over the past few years, and concerns over lack of right product have been ignored. Instead the focus has been on cutting staff hours and impelmenting accessories wall bays bays at cost to stores. Unsurprisingly the sale of nail varnish kit's, notebooks, perfume, and mint's was not a success!!

    The stores have constantly been in sale or promotion which has further devalued the product.

    The company introduced staff uniforms for one season which were over bought and remain gathering dust in the warehouse.....again at a cost to stores!

    There has been virtually no investment in older style stores, these now look grubby and dated on the high street.

    Management have been left frustrated and demoralised by the lack of concern on the above by the directors and staff morale has been low. Faith has always been as much about the people as the product. There has been a total disregard for staff which is evident in the lack of information that has been given to them recently.

    Faith's range this season has been the best in years....too little too late!

    The future for Faith should be chasing Top Shop shoes, to compete with cheaper brand Barratts would be a big mistake and result in the demise of Faith shoes.

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