Sports Direct Group’s head of elevation, Mike Murray, and Flannels’ head of brand, Carl Tallents, exclusively unveil their UK and international expansion plans for Flannels and explain why Sports Direct is betting big on the high street.
“We want to be the biggest global luxury retailer. We’re in the early stages, but we have a clear vision for Flannels, we have ambition and we are willing to invest,” Sports Direct Group’s head of elevation Mike Murray says confidently from his impressive corner office overlooking London’s Oxford Street and Soho.
That vision comprises opening 15 to 20 Flannels stores – each between 10,000 sq ft and 20,000 sq ft – per year until it reaches its target of around 100. It currently has 43 shops in cities such as Liverpool, Leeds and Manchester.
Not only grand in terms of scale, the stores themselves are incredibly high spec – the regional shops are designed by Argent Designs, which also decks out the super-yachts of the rich and famous. The average spend on the shopfit is £300/sq ft.
We are focusing on key cities that haven’t had exposure to luxury or a well-executed luxury environment
Mike Murray, Sports Direct Group
By June, Flannels will open new stores in Newcastle, Chester, Watford, Sutton and York, as well on London’s Oxford Street.
“We are focusing on key cities that haven’t had exposure to luxury or a well-executed luxury environment,” explains Murray. “Our stores aren’t the typical size of 2,500 sq ft or 3,000 sq ft. We are focusing on big destination stores, so it is worth people’s while coming. They can get a wide range of brands, they will have the stock in their size and people are willing to travel, as it is an experience. We want to make exclusive product inclusive.”
With an exterior adorned in digital screens showcasing everything from waterfalls to brand campaigns, the outside of the highly anticipated flagship Flannels store at 161-167 Oxford Street has been lighting up the east end of the UK’s busiest shopping thoroughfare for several months – and the interior will certainly not disappoint when the 17,000 sq ft store, spread over four floors, finally opens its doors in June.
Designed by Italian architecture and graphic design studio P&P in collaboration with artist Riccardo Previdi, the store – shown here for the first time – will feature a curated collection of men’s and women’s wear, footwear and accessories from some of the biggest luxury brands in the world, including Gucci, Dolce & Gabbana, Balmain, Off-White, Jimmy Choo, Moncler and Vetements, as well as yet-to-be-unveiled partnerships, exclusives and experiences.
Retail prices at Flannels range from £24 for a Hugo Boss T-shirt to £4,300 for a Gucci parka jacket.
Above the store, where Drapers meets Murray and Flannels head of brand Carl Tallents, are the offices of Sports Direct’s premium lifestyle division, comprising Flannels, USC, Van Mildert, Cruise and House of Fraser.
The building, which has been three years in the making, is modern and stylish with grey walls, pops of colourful modern art and floor-to-ceiling windows. It is designed to emulate “the Google effect” of attracting and retaining young talent, says Tallents. It portrays the modern image of Sports Direct – much like Murray and Tallents themselves: innovative, dynamic and ambitious.
Everyone from the buyers to marketing can touch and feel the product, and will always remember we are a retail-first business
Mike Murray, Sports Direct Group
“It has been an exciting journey,” says Murray, who joined the group as head of property in 2015 and is engaged to Sports Direct owner Mike Ashley’s elder daughter, Anna. “A key part of the strategy was buying this office [above the soon-to-open Oxford Street Flannels] three years ago to attract the talent.
“We consolidated the Cruise and Van Mildert head offices, and brought everyone [from the premium lifestyle division] together here. It is important for me that people can see the store downstairs. Everyone from the buyers to marketing can touch and feel the product, and will always remember that we are a retail-first business. They can understand what we stand for and what the strategy is. It makes the workforce more connected.”
Founded by Neil Prosser in 1976 in Knutsford, Cheshire, Sports Direct took a majority share in Flannels in 2012, and bought the remainder in 2017. Over the last two years, turnover has increased 100%, largely driven by new store openings, which number 17 in 24 months. Flannels currently employs 70 people in its head office and around 1,000 altogether, including store staff.
While Sports Direct does not separate out figures for Flannels, its most recent results for the 26 weeks to 28 October show sales for the premium lifestyle division were up by 29.4% to £87.6m.
Gross margin increased to 34.2% from 31.8%, and operating costs rose by 32.2% to £27.5m as a result of the Flannels store expansion. Underlying EBITDA for the division grew from £0.7m to £2.5m.
When you open a store, you increase visibility in that area. It is like having a billboard in the town
Carl Tallents, Flannels
Not content with expansion across the UK market, Sports Direct is also planning to take Flannels overseas.
Murray reveals its intention to open shops in key cities across Europe, the US and eventually the Middle East and Asia: “We are looking at the US and Europe right now. We are in the early stages, but we have vision and ambition. In some markets we will go deeper than just the big capital cities. With others it will be one flagship store. It will be on a location-by-location basis. We are partners for brands, we [will go] where they need a brand partner, but we are actively looking. The success of the rollout is inevitable. When you have a model that works, it is hard to hold back,” the Doncaster native states.
Flannels’ relationship with brands, which operate on a wholesale model, is crucial its growth, says Tallents: “We are working in partnership with brands – we are not competing with them. The new stores and overall strategy have had a really positive reaction. We are seeing great growth and, as a result, so are they. It is a partnership.”
The managing director of one brand stocked by Flannels agrees: “The group has old-fashioned values in a lot of ways. They are traders and they are quick to react, they encourage you to work with them and they believe in brand collaboration.
“It is refreshing that they are creating store experiences, and giving the consumer something fresh and different. No one can accuse the Sports Direct Group of resting on its laurels – they are continuing to invest and push the boundaries. They are taking this as an opportunity to elevate themselves as a retailer.”
Customers can be educated about the products with a stylist in store, in a luxury environment
Carl Tallents, Flannels
In a market dominated by headlines about administrations, company voluntary arrangements and redundancies, Murray says the successful Flannels formula is simple but hard to execute: “Stores in the right locations at the right size, with the right brands, and the right logistics and buying systems to make sure you have the right quantity of the right stock. It sounds obvious, but it is difficult to align. You have to make sure the key three pillars of the business co-exist, otherwise the formula isn’t right. There is always room for improvement, but we are proving it works – and so are the numbers.”
Crucial to the operational logistics is the 400,000 sq ft Flannels warehouse, which is currently located in Wigan. However, in anticipation of growth and to improve efficiencies, the business is moving to a fully automated 250,000 sq ft warehouse for the premium lifestyle division as part of the 2.2 million sq ft warehouse at Sports Direct’s headquarters in Shirebrook. It is under construction and will go live before the end of the year.
Meanwhile, the Flannels website will replatform, along with the rest of the Sports Direct fascias, on to a state-of-the-art Google Ventures platform over the next 12 to 18 months. Around 25% of Flannels sales come from online, and 90% from the UK.
Tallents expects this online-offline sales ratio to stay more or less the same, despite the retailer opening more stores, as when a store opens, online sales in the area also increase.
“When you open a store, you increase visibility in that area. It is like having a billboard in the town, so shoppers become more aware of us. It is a great advertising space,” says the former G-Star brand manager, who joined Sports Direct in 2017.
It is an opportunistic time to roll out and invest in the high street
Mike Murray, Sports Direct Group
Flannels is driving multichannel growth through initiatives such as its “style and collect” service, which it is trialling at Westgate Oxford. Shoppers can go online, browse and select pieces they are interested in, and book a stylist in store for a one-to-one session.
“It is an elevated version of click and collect,” says Tallents. “It is a great footfall driver to store. Customers can be educated about the products with a stylist in store, in a luxury environment. It is something we can offer that online pureplays can’t, as we have those physical stores.” However, he adds that ultimately the main focus for Flannels is bricks-and-mortar retail.
“Luxury is about touch and feel. It is an emotional thing to buy a Gucci or Prada bag. There is a reason it is luxury, there is a reason it is expensive and you need to experience that in store to educate the consumer. It is important to have online channels as well as stores, but to drive shoppers into stores is key for our brand partners and us.”
Murray agrees that stores are a priority across the group, adding that high-quality, experiential shops give the Sports Direct business an edge over its competitors: “It is the execution on the high street that matters. It is an opportunistic time to roll out and invest in the high street.
“We have our own brands, but our core business is multi-brand retailing. We need to have a point of difference and we need to do retail very well. We need to offer something special and do a really good job logistically.”
Jonathan de Mello, head of retail consultancy at property services firm Harper Dennis Hobbs, agrees that the high street is a buyers’ market: “There are lots of opportunities out there. There is a lot of space available and rents are down. Being part of the wider Sports Direct Group gives Flannels an advantage as they have massive bargaining power with landlords and suppliers.”
However, he cautions that Flannels’ price points may be too high for some regional towns: “They need to be careful about where they go. Flannels’ price points are high, so they need to make sure the demographics are right and people in the area have the right level of disposable income.”
Brands see the numbers, we see the numbers and it makes us confident to invest more in the high street
Mike Murray, Sports Direct Group
Despite economic headwinds, Murray remains confident in the Flannels’ consumer’s appetite for luxury products: “Everyone is more aspirational now – the demand is there. With social media, people want to wear [and show off] a higher proportion of their wealth or income. People are brand driven.”
Murray does admit that the biggest challenge is the speed at which the retailer can open stores: “The time and effort it takes to open the stores can be a problem. There is a lot of detail and it is a high investment. The design process is long, and they aren’t cookie-cutter shops – each one is different. It can slow us down.”
House of Fraser opportunities
In terms of the wider Sports Direct Group and plans for stablemate House of Fraser, Murray keeps his cards close to his chest, but confirms the group “wants to invest” and is looking at operations ahead of unveiling a five-year plan.
While their boss, Ashley, aspires to turn House of Fraser into the Harrods of the high street, for now the focus is firmly on making Flannels a global luxury player to be reckoned with.
“I don’t know anyone else in the world who is doing what we are doing right now in the luxury space in terms of the multiple doors, our ambition and the people we have hired,” Murray states. “We have doubled our business in two years. Brands see the numbers, we see the numbers and it makes us confident to invest more in the high street. Our formula is working.”