Andy Long, Pentland Brands’ first CEO from outside the family that owns it, is restructuring and expanding the business to beat the competition.
Walking through Pentland Group’s expansive campus in Finchley, north London, it is hard not to be impressed. From the contemporary open-plan building and quirky artwork featuring the company’s best-known brands, to the indoor swimming pool and fully equipped gym, the offices tell the tale of a world-class, modern business.
The group comprises Pentland Brands, which owns or operates the licences for 12 well-known footwear, sports and outdoor labels – including Speedo, Berghaus, Canterbury of New Zealand, Kickers and Red or Dead – and a retail division. The latter includes JD Sports Fashion, in which Pentland holds a 57% share, and an investment arm that invests in businesses across a range of different industries.
Tasked with future-proofing Pentland Brands and bringing its operations up to date in a rapidly changing and challenging market is Andy Long, the division’s first non-family CEO. Before he took over the top job in 2015, the company was run by three generations of the Rubin family, who founded the business – then called The Liverpool Shoe Company – in the early 1930s, and still own it today.
When I first arrived [at Pentland] I was seen as an alien creature
A trained accountant, Long’s background is in fast-moving consumer goods: before joining Pentland as finance director of Speedo in 2005, he was programme director at Boots from 2001, and before that he worked at Procter & Gamble for eight years.
“When I first arrived [at Pentland] I was seen as an alien creature,” he laughs. “It was clear to me that sports, fashion and outdoor were very different from the world I had come from, but also very distinct and different from each other. A lot of those differences have [since] gone away, in terms of who the retailers are and the way they operate.”
Today, part of his focus as CEO is on making sure the company is communicating effectively in the new digital age: “We are thinking about our brands: our end consumers but also our retail partners in the middle, who have their own aspirations. How do we make sure we are connecting?”
This aim led Pentland Brands to simplify its structure at the end of last year, creating a single touchpoint for each retail customer, regardless of how many of its brands they stock. The business owns sports and outdoorwear brands Berghaus, Canterbury, Speedo, Ellesse and Mitre outright, as well as footwear brands Boxfresh, Kangaroos, Red or Dead, and US canvas shoe label SeaVees. It holds the UK footwear licence for Kickers and Lacoste, and the global footwear licence for Ted Baker. It is also a shareholder in brands such as Hunter Boots, Heidi Klein, Butterfly Twists and Tracksmith.
“We were operating with the brands in separate and autonomous silos,” Long explains. “Today it is about working with your customers to see where they are, what the opportunities for growth are and what pressures they are under. How can we give a better service? How can we make sure we are taking the opportunity to talk to everyone about every opportunity? It’s about building a business together to our mutual benefit.”
As part of the strategy, the business consolidated its offices, and around 100 roles were made redundant (Pentland Group employs 1,700 people globally). Canterbury and Mitre moved from Stockport and Wakefield respectively to Pentland’s existing office building in Nottingham, where they share space with Speedo. Berghaus continues to be based in Sunderland, while the rest of Pentland’s portfolio remains in Finchley.
“Where we have been able to transfer people we have done that,” says Long. “But no matter how flexible you are, some people are tied to the area, and that resulted in redundancies. It’s a sad situation.”
Other changes include moving to a more collaborative approach to its supply chain operations. Pentland Brands manufactures 50% of its products in China and the remaining 50% in other Asian markets, including Hong Kong, Indonesia, India, Vietnam and Thailand.
“We are looking at how we can engage our suppliers in our whole business plan and give them the opportunity to work across brands rather than jealously guarding them as we sometimes did in the past,” explains Long.
“[For example] we had been investigating new technology at Speedo and separately thinking about compression [garments] for rugby, yet compression is key to swimming – we weren’t joining the two up. Now we are speaking to people who were traditionally Berghaus vendors about Canterbury, and so on. It’s about using our size to stay competitive.”
In its most recent full-year results, for the year to 31 December 2016, revenue from the Pentland Brands portfolio and other non-retail businesses edged up by 1% to £634m. Ellesse and Ted Baker footwear were highlighted as star performers, and their sales up were 45% and 6% respectively.
Stores are more of a marketing exercise to create awareness and demand
Andy Long, Pentland Brands
Pentland Group’s operating profit increased by 50% to £331m during the period, but it does not split out the branded division’s results.
Almost all of Pentland Brands’ sales – 95% – come from wholesale, while 5% is generated by its brands’ websites and stores.
Long says the group is committed to this model: “We’re always very clear that our websites are there to educate and service consumers. We haven’t been aggressive on price as we don’t want to compete with our customers.
“Likewise, stores are more of a marketing exercise to create awareness and demand. From a business point of view the [Rubin] family is invested in JD Sports [in terms of retail], so we are focused on building brands successfully.”
Shifting consumer behaviour and the move towards online and away from stores have changed the retail partners Pentland Brands works with in recent years, as it endeavours to get in front of customers in the right place at the right time. It has increased the number of online players it works with.
“If you look at the Christmas trading results a clear pattern is emerging,” points out Long. “If a retail business is strong online it is strong overall. As a business we need to be available in the right place when consumers do decide to go shopping.
“We will always be led by our consumer. Take Amazon, for example: they entered our market and we thought if shoppers are going there, we need to be there. It is about managing that overall mix. It is about everyone growing and everyone succeeding – that is the challenge we are all wrestling with.”
Footwear is strong for Pentland, and Ted Baker and Kickers have won Drapers Footwear Awards in 2016 and 2017. Ray Kelvin, founder and CEO of Ted Baker, says: “The people at Pentland are family. They’ve always looked after Ted Baker properly.”
Long says Pentland operates both wholly owned and licensed footwear brands, to “give balance to the portfolio”: “In footwear, it is about recognising what we can do. We aren’t huge compared with other brand houses but [having both] gives us breadth and flexibility and makes us leverage our value in the best way possible.”
We are under-represented in the US, which is part of the reason we acquired SeaVees last year
The business is actively looking to acquire new footwear brands and licences to add to its portfolio, says Long: “There are still a lot of brands out there that could have an effective footwear offer, and we could help them get there faster.”
He is also keeping an eye out for new sports, fashion and outerwear brands: “For us it’s about thinking about who the consumer is for each brand and seeing what opportunities are there.”
Within the existing portfolio, he has identified opportunities to expand some of Pentland’s more specialist or performance-focused brands by widening out their appeal to a fashion consumer. For example, he is looking to increase the number of “social explorers” buying Berghaus, which has traditionally been targeted at hardcore outdoor enthusiasts.
Pentland Brands sells to 190 countries and around 60% of its sales are from outside the UK, and Long says he would like to increase international sales to drive long-term growth: “We are under-represented in the US, which is part of the reason we acquired SeaVees last year. [It is making its UK debut for spring 18.] We also want to progress in western Europe. We have made lots of ground, but it could be at risk depending on post-Brexit opportunities.”
Like his peers, Long finds the uncertainty around Brexit an ongoing challenge: “What will change, what won’t and over what timescale? We need to think about the flow of goods and what it means for the employee base. It is frustrating not knowing, as the deadline comes towards us rapidly.”
However, he points out that family-owned businesses have a significant advantage in times of economic uncertainty: “We have never been burdened by short-term debt, or having to turn something around quickly like private equity owners have to. We can afford to take long-term decisions and the decision-makers are one phone call away. Decisions can be made quickly and the group as a whole has really benefitted from that.”
We look obsessively at how we do some things like the big guys
The managing director of one footwear chain that stocks some of Pentland’s brands says the company’s family values make it easy to work with: “Pentland is an honourable company. It is proud of its family status. It treats us fairly both with the brands it owns and the licences. Having that portfolio of brands means it isn’t a one-trick pony so it can weather the market in difficult times.”
Striking the balance between being a nimble family-owned business and a large corporate entity will be key to Pentland’s future success, says Long. “Over the next five years we are focused on having an exciting stable of brands, doing innovative things and being recognised as a leading thinker in the industry in terms of how we do business.
“We look obsessively at how we do some things like the big guys – we want the best processes and highest level of corporate responsibility. On the other hand, small start-ups can achieve a lot quickly. We need to learn how to be more nimble and agile. Above all knowing who our customers are and designing innovative product is key – that’s the extra layer of value we bring.”
Andy Long’s CV
2015-present Chief executive officer Pentland Brands
2016-present Board member, Sport England
2012-2014 Chief operating officer Pentland Brands
2009-2012 Chief financial officer Pentland Brands
2007-2008 Co-president Speedo International
2005-2006 Finance director/chief operating officer Speedo International
2001-2005 Programme director (final role) Boots Group
1993-2001 Associate director (final role) Procter & Gamble (P&G)