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Facing up to the competition

Fat Face chief Anthony Thompson explains why he’s confident the brand will succeed where others have failed in the US and why he resists mid-season discounting and Black Friday.

Anthony Thompson Fat Face

Anthony Thompson, CEO of Fat Face

“You can look to have fun in whatever you do. Why choose the boring way of doing it, when you can choose the interesting way?” Outlining his approach to retail over coffee and a chocolate brownie, Fat Face boss of six years Anthony Thompson perfectly sums up his leadership style.

A self-confessed non-office type who is not afraid to speak his mind, Thompson describes his natural habitat as being out among customers. His favourite thing is touring the UK and Ireland, visiting his 216 stores in George, a 1965 split-screen, right-hand drive camper van, or Jerry, a 1991 Jaguar XJS. And, rather than the more routine Fat Face headquarters in Havant, Hampshire, his preferred meetings are held on the beach or in parks near his more rural locations.

But don’t be fooled into thinking Thompson’s laidback approach reflects his ambitions for the business. He is working up big plans to expand internationally, initially in the US and then Europe, to extend the product range and continue growing its UK footprint, all while resisting ongoing heavy discounting in the market, which he believes is “short-termist” and “stifling creativity and innovation”.

Looking every inch the Fat Face ambassador at the Westfield London flagship - wearing flip-flops, jeans and a blue polo shirt - Thompson, a former Marks & Spencer and George at Asda executive (see box, right), is confident that Fat Face’s US launch in November will be a success.

The first store in Portland is expected to open in early November. Thompson hopes to have two by Christmas, and a third before the end of the financial year in May. The stores will be slightly smaller than in the UK and Ireland, with a “holiday destination” shop typically around 1,000 sq ft rather than 1,200 to 1,500 sq ft, but they will have flexibility to grow.

“We want to be a bit measured about it,” Thompson explains, but he is conscious of the need for critical mass to test the concept. He plans to open five to 10 US stores in the next 18 to 24 months and then pause to reflect. The focus will be on the Boston area, and Thompson is scouting for locations including Martha’s Vineyard and Portsmouth.

Fat Face Westfield London

Fat Face’s Westfield London store

Competition will include established US lifestyle brands such as Vineyard Vines, Life is Good and The Black Dog, but this does not deter him: “If I’m going to be frightened about the competition, I might as well pack up and go home now. I go where my customers are. If I happen to share customers with you, so be it.”

Acknowledging high-profile failed attempts by British retailers such as M&S at cracking the US, Thompson says the business has been researching the region for three years. He defiantly adds: “Just because it’s a tough market and a lot of people have failed, doesn’t mean to say our customers aren’t there. So will we make a few mistakes? Possibly, but we will learn from them quickly and adjust the model.”

He is not concerned about connotations of the word ‘fat’ in the US either. “I don’t mind that it might get people to talk about the brand. It’s not a story made up in a studio in Soho - it’s a real brand with real heritage and the British piece is important to get across. We will get noticed, we will get seen and we will get talked about.”

Fat Face, which was bought for £360m by private equity investor Bridgepoint in 2007, was launched in 1988 by friends Tim Slade and Jules Leaver, selling T-shirts in French ski resort Méribel. The name originates from the challenging Face de Bellevarde slope in adjacent resort Val d’Isère.

With the initial focus in the US on standalone stores, 51-year-old Thompson doesn’t rule out the possibility of concession and wholesale partners, saying he is “open-minded”.

In the UK these routes to market are a very limited element of the business. Fat Face’s only wholesale partner is Nuance, which runs Center Parcs’ retail operations and sells products in its five parks. Its sole concession partner is John Lewis, where it is in around 20 stores.

Fat Face is proving a strong brand for John Lewis. Ed Connolly, fashion and beauty buying director at the store group, says: “Under Anthony’s leadership, Fat Face has become one of our fastest-growing brands, and is now represented in the majority of our shops and on Johnlewis.com. We are hearing strong feedback from our customers, who are reacting positively to the development of products and also the strategic positioning of the brand.”

Thompson says that, while both the John Lewis concessions and Nuance agreements are “very successful”, he is not actively seeking more. However, he will consider opportunities put to him.

The focus here in the UK, where it faces strong competition from rivals such as White Stuff and Joules, is on boosting the existing retail footprint from around 350,000 sq ft to around 550,000 sq ft in the next five years. This will include eight to 10 relocations a year, and eight to 10 new stores, such as a 4,000 sq ft shop in Birmingham’s new Grand Central scheme in September.

The brand is specifically hunting for space across the Northwest in holiday destinations and affluent market towns, as well as in Heathrow Airport and train stations.

Conversely, for continental Europe he will initially focus on wholesale, concessions and online partners. Citing countries of interest as Germany, France, Austria and the Benelux and Scandinavian regions, expansion into Europe features in Thompson’s five-year plan, but only after the US rollout is up and running, so it could be in the next two years: “I’d be much more open-minded than perhaps we were in terms of our entry strategy to the US to maybe have concessions in Europe in department stores as a first step, and/or partnerships with online operators.

Fat Face Westfield London

Inside Fat Face’s Westfield London store

“It’s about focus and understanding exactly where our customers are. It wasn’t as obvious when we went through the countries in Europe exactly which cities or holiday destinations you might go into first. We can de-risk some of our future investment in Europe by understanding either through concessions or an online partner where we go first.

“To cope with this rapidly growing footprint, Fat Face will also ramp up its distribution. It currently has a 92,465 sq ft centre in Havant, and Thompson expects to add a second site of about 80,000 sq ft in the next two to three years elsewhere.

However, physical sales and distribution space are not the only things Thompson wants to expand. He is keen to venture into new product categories “in the next two or three years”. The Preston-born retailer says this could include home, outdoors or technical products, alongside increasing activewear, which is offered through its Activ88 brand, and kidswear, which he says “is a relatively small proportion of our business but very quickly growing”.

Retail prices for the spring 15 womenswear collection range from £15 for a vest to £65 for a lightweight jacket. The target shopper is aged 32 to 36.

With 70% to 80% of supply coming from China and India, Thompson is keen to support more local talents. Fat Face’s original Made in Britain line with the now-defunct Wolverhampton-made Cro’ Jack label ended three years ago, but Thompson says: “If there are any British factories that want to talk to me, I’m open ears, very supportive and will work my hardest to make it happen. One of the biggest challenges we have in the UK is what is the supply rather than what is the demand.”

The crux of the problem, he insists, lies in the current discounting culture.

“What I find irritating is that there’s an enormous focus on intake margin. Negotiations can go on for months with suppliers about fractions of 1% margin and then - at a stroke of a red pen - everything is discounted by 50%. What a waste of time. Why aren’t we having a conversation about full-price sell-through with UK manufacturing partners, so we are realistic about how much we buy? If you can sell it at full price, maybe it doesn’t matter as much that your intake margin is a lot lower because the cost base is much higher.”

This leads Thompson to one of his big hobbyhorses: constant Sales and Black Friday. Under him, Fat Face has reversed its participation in mid-season Sales and eschewed the discounting day. This year, in the original spirit of Thanksgiving, the retailer will donate 10% of sales made in store on Black Friday (capped at £250,000) to local charities chosen by staff and shoppers.

“I don’t agree that it’s honourable to do flash promotions online and not offer consumers in your physical stores the same price, and that’s beginning to happen,” he says. “I think it’s lazy marketing to stick a 70%-off banner in your window just because traffic is down. In the short term it’s fine - you will get a lift, you might even get happier customers - but in the long term you will destroy your brand and customers will be unhappy, because they won’t be able to trust your pricing and they will become cynical.

Fat Face Autumn 15 collection

Fat Face Autumn 15 collection

“My only plea to the market is don’t be short-termist. Do not make a decision this year thinking it will bear no relationship to next year. The decisions you make in this trading year always affect next year.”

But it’s not easy going against the flow and he jokes: “It’s one of the reasons I don’t have an awful lot of hair.” Worse still, he worries it “stifles creativity, innovation and potential investment in the future”.

Fiona Lambert, vice-president of own brand development and design at Asda’s George, who worked with Thompson during his time as managing director there between 2007 and 2010, praises his ability to take a brave stance. She describes him as “a very charismatic leader” who “encouraged brave, market-leading decisions” and adds: “His love of good fabrics and attention to detail would mean he has a real affinity with the Fat Face brand.”

One such decision by Thompson was to pull a planned IPO that would have valued the firm at £400m in May last year after market conditions suddenly changed. Instead, the business was refinanced via the banks last autumn to fund its future growth plans. Now Thompson insists he has “no plans to suddenly reignite that idea. It’s not on the radar.”

Aside from having to make tough decisions, Thompson believes the role of retail CEOs is changing. He is adamant that “you cannot be a faceless chief executive any more”.

He receives 10 to 20 emails a week from customers and deals with them all personally, including a regular message every Christmas Eve from a shopper, which he always responds to that evening, explaining that shoppers now expect immediate responses. Defining his customer-centric approach to retailing, Thompson says: “Today, you have to be obsessed by your customers, otherwise you are dead. You don’t have a choice, you have to be prepared to be available and accessible for customers.”

CV

2010 – present Fat Face CEO

2007 – 2010 Managing director of Asda’s George

2003 – 2007 M&S retail director

2000 – 2003 Gap senior vice-president for Europe

1997 – 2000 – CEO of book shop Blackwell’s

Fat Face by numbers (full year results to May 30 2015)

·         Total sales increased by 2.7% to £205.4m

·         Ecommerce sales increased by 11.1%, and now represent more than 16.2% of overall sales

·         Lower EBITDA of £36.5m, compared with £39.3m in 2014 due to unseasonably warm autumn and increased capex investment

·         The business invested a record £9m across its store estate, ecommerce and IT

·         Store portfolio increased by 8% to more than 350,000 sq ft

·         New long-term finance provided by £180m debt facility

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