The chief executive of The Original Factory Shop believes the discount department store chain has hit upon a winning formula that will take it to 500 stores by 2020
The recession was almost irrelevant,” says Angela Spindler, chief executive of The Original Factory Shop. “There won’t be many businesses that can say that,” she adds proudly.
Far from being flippant, Spindler, who has been at the helm of the discount department store chain since January 2009, has the figures to prove it and the growth plans to back it up.
“The business did well out of recession and in the recession,” she says. “The Original Factory Shop offers fair prices on your doorstep for things that are obviously great value for money.”
Somewhat overlooked as a retailer of fashion, 50% of The Original Factory Shop’s offer is devoted to the category and as the former managing director of supermarket clothing brand George at Asda, Spindler is driving the category with off-price and own-label brands.
“I love the business,” she says with enthusiasm. The customers are the customers I know because they are similar to Asda customers. They are maybe at a different life stage, just a bit older and living in a different place, but I love the principle of giving real value for money while working hard to make sure products are great.”
Spindler joined The Original Factory Shop after what she describes as an ill-timed 10-month stint as managing director of department store chain Debenhams in 2008. She grew impatient when it was forced to shift its focus from growing the business to its debt pile following the collapse of Lehman Brothers bank, she explains. Joining The Original Factory Shop was like coming home, she says, albeit a “scary” homecoming. Spindler replaced George Foster, who retired in 2009.
“I’d imagined that I would be promoted to chief executive [at The Original Factory Shop] rather than go in [at that level],” she says. “I had never worked for private equity or in a small business before. [Asda owner] Walmart is the biggest corporation in the world so I was used to that infrastructure around me. I also had to put some of my own money in. There were so many things about it that were scary, but what compelled me was the proposition. And it is in the value sector, my sector, where I had been for 10 years. I went for it.”
The Original Factory Shop could be described as an off-price convenience store. It is a very local business with 146 stores - and a catchment of about 20,000 customers per shop - carrying a plethora of categories and brands which are reduced by at least 40% to 70%.
About two thirds of what is sold is made specifically for The Original Factory Shop while the other third is off-price clearance stock sourced from brands and is a “great footfall driver”, says Spindler. “You don’t know what you are going to find - it is the bargain hunter’s paradise.”
She adds that The Original Factory Shop competes for customers with “almost everyone”. Spindler says the business is often compared to the likes of Matalan and Marks & Spencer as well as supermarkets.
Standing in The Original Factory Shop in Debden in Essex, the description “department store” seems somewhat misleading for the single-floor, 6,000 sq ft store.
“If a department store is a place that has a lot of different departments and sells a broad range of non-food, has lots of different brands as opposed to lots of manifestations of the same brand and has a differentiated service proposition, then to me that’s a department store,” Spindler says firmly.
The brands on offer are often well-known, mid-tier brands. A rummage through the rails reveals old Topshop product, and Spindler laughs, pointing to another: “This one is probably George.” Despite the value offer,
Spindler has discovered that she can push prices.
“We can sell high-ticket items such as men’s leather jackets,” she says. “If it’s showing a good discount from the RRP, that is what the customer enjoys. At the other end of the spectrum we have got good value. One of the biggest volume lines is two pairs of men’s jeans for £12.”
A growing part of the business is its own-brand offer, which has allowed Spindler to provide for an often overlooked customer - the 40-plus woman.
“We did feel it was important to look after this particular segment of customers on a more continuous basis,” she says. “[This customer] is so overlooked and so demanding. She is by far our biggest spender.”
The result was womenswear own-brand Mimosa, which launched in March. At the same time, mainstream brand Headland for men was launched.
Footwear - both own label and branded - is also a key driver for the coming season. “I think there is an opportunity to dial that up,” says Spindler, who adds that the business already benefits from strong branded footwear sales.
Aside from the obvious enthusiasm for the business, Spindler also has a duty to recognise value for The Original Factory Shop’s private equity owner Duke Street, which backed a £69m management buyout in 2007 and in May was thought to be considering selling the business.
The growth story is clear. Plans to turn the 146-store retailer into a 500-store portfolio by 2020 are afoot and record sales of £132m and EBITDA of £14.7m have piqued interest.
Spindler says that any sale is at least a year off: “We want to get another year of growth going, demonstrate we can open 30 stores [a year] without the benefit of [taking on former] Woolworths [stores], extend our warehouse so we are set for 500 stores and get new systems to get more promotional activity.”
Spindler relishes a challenge and can’t hide her excitement at taking charge of a growth-story business: “I love [The Original Factory Shop’s] position in the market. I love the smallness of it and the fact that I’m running it.”
What do you think consumer shopping behaviour will be like next year?
We’ve got two more years ahead of consumers being very spend-conscious and having less money. People talk about the [positive] impact of the recession on value retailing, but the sector had been [growing in popularity] for years. I think that momentum will continue.
What will happen to pricing in the coming months?
There is a lot of cost price inflation in the industry. There is no relief from things like currency [fluctuations], freight, oil prices, cotton prices - consumers are in for a tough time. We will pass on prices to the customer cleverly and with a lot of thought. In some categories we will absorb price increases by ensuring we sell more volume and in others we will increase prices, but overall we will maintain our margins.
What was your reaction to the Budget?
I am the eternal optimist, and I am confident that our customer will spend more with us and less elsewhere as a consequence of us being in the value for money end of the shopping repertoire.
I think people have an amount of money - they don’t really know individual prices, but they know how many things they should get and roughly how much everything is in a basket. If that suddenly changes, they might just have a look somewhere else where they can get quality brands with a 70% discount.
2009 Chief executive, The Original Factory Shop
2008 Managing director, Debenhams
2005 Managing director for George global, Asda
1997 Joins Asda in the foods division
1988 Director, Pedigree Masterfoods
1985 Regional sales manager, Coca-Cola Schweppes
1983 National account manager, hotel sector, Cadbury Schweppes