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The Drapers Interview: Ray Hernan, Arnotts

With a refreshed offer and customer loyalty card, Arnotts boss Ray Hernan is leading the Dublin store out of the dark days of Ireland’s economic crash.

It’s now one year since Ray Hernan took up the chief executive role at Arnotts on Dublin’s Henry Street, tasked with “rebuilding the great tradition” of the prestigious department store that was hit hard by Ireland’s economic crash in 2008.

This has included a full-scale overhaul, begun two years ago, of the store format and brand mix, the launch of a loyalty card this week (September 1), and will continue with the creation of a mobile-optimised website in October, as Hernan aims to take advantage of the country’s recovering economy.

Hernan, who was previously at fellow Dublin department store Brown Thomas, joined Arnotts in 2010 as chief operating officer when it was taken over from previous owner Nesbitt Acquisitions by Anglo Irish Bank and Ulster Bank due to its large outstanding loans of £208m, and has been busy making it more relevant to shoppers by adding younger, more trend-led ranges such as contemporary womenswear brands Goat and Lennon Courtney - a local Dublin label -to its fashion offer. Hernan has stepped this up a gear since he was made chief executive, and the strategy is supported by its new owners, US investment firm Apollo and The Weston Group, which also owns Selfridges.

It was back in May that Ireland’s Competition Authority approved the sale to the Weston Group of €140m (£115m) worth of loans owed by Arnotts to Ulster Bank, meaning the Canadian group now owns 50% of the business. The other half was bought by Apollo last December.

“Both parties are very keen to see the business progress and we’re delighted to have them on board,” says Hernan. “They want to see Arnotts continue as a standalone store under the iconic name, which is great, and they want to invest in the business as they see a huge opportunity to leverage our position in the city centre. They have been very supportive of our strategy to drive the company forward.”

One of the key points in Arnotts’ growth strategy is to refresh the brand mix to attract a younger clientele. “The feedback we were getting was that we lacked any credibility for our womenswear offering. We had to come up with a brand range that was fit for purpose in terms of repositioning the store and having a greater resonance in the mindset of a younger customer. Not that we want to alienate our very loyal [more mature] customer base but we needed to broaden it,” explains Hernan.

His revamp of the womenswear department means 60% of the 82 brands on offer are new to Arnotts since 2010 - when it had 89 brands - although he declines to name any of the brands that have been dropped. He believes the fashion offering for autumn 14 is the store’s strongest ever, with new additions including Phase Eight and Jigsaw shop-in-shops - the latter, which will land in store next month, having chosen Arnotts as its launch pad for its return to Ireland, after exiting the country two years ago when it closed its Dublin store.

“We’ve just launched Phase Eight and because of its brand recognition here it hit the ground running. The customer was shouting for it. Jigsaw hasn’t been in Ireland for a number of years and when Peter [Ruis, Jigsaw chief executive] and the team saw where we have repositioned ourselves, he said the brand is perfect for your store,” explains Hernan.

Ruis says of the move: “We are delighted to be returning to Dublin. Arnotts was an obvious choice as a partner as they have invested heavily in a great number of new credible fashion brands and we feel the Jigsaw offer of affordable luxury will resonate strongly with their customers.”

More praise comes from Charlotte McHardy, UK managing director of Dutch womenswear group Veldhoven, whose Sandwich brand is stocked by Arnotts. She says the team is “highly professional and hugely personable”, adding: “While being consumer focused, they understand the value of a brand, take their business partnerships very seriously and are always a pleasure to work with.”

Denise Shepherd, global sales director at lingerie brand Panache, which has been stocked in Arnotts for 10 years, said the store’s “passion for fit and service mirrors the Panache ethos and values”.

In menswear the brand mix has also been strengthened, with Boss Green and Orange opening its own joint shop-in-shop in October. It comes as the 79 brands - down from 88 in 2010 - in the department moved from two floors to one area on the ground floor earlier this year.

“It was very disjointed and we knew we needed to get menswear onto one floor. We wouldn’t have got Boss if we hadn’t rejigged the environment and repositioned our offer with labels like Brooks Brothers and Gant over the past few seasons. It will be a point of difference for us and it’s a sign of confidence and recognition of how the store has changed.”

However, it is accessories that are leading the way in terms of the 300,000 sq ft store’s transformation, with the addition of more upscale labels including Longchamp, Orla Kiely and a 2,000 sq ft concession from US leather goods label Coach - Arnotts is the brand’s only full-price stockist in Ireland - over the past two years.

The 10,000 sq ft Shoe Garden is the icing on the cake. The largest women’s footwear department in Ireland, filled with more than 50,000 pairs of shoes from 47 brands including Kurt Geiger, Stuart Weitzman and Dune, opened in April 2012.

“Accessories was a bland, staid area but we have succeeded in expanding, enhancing and repositioning the product offer with the arrival of brands like Coach. They create a snowball effect - once you have an anchor brand that has resonance in the market, others will follow,” points out Hernan.

He now has the confidence in Arnotts’ brand offering to “really shout about” the store and promote its wares to a national audience with the launch of its first loyalty card. The Wonder Card launched on September 1 and allows shoppers to collect and spend points on any product in store or online using the card or a free mobile app.

“The Wonder Card is the product of two years’ work and although we are late to the market I think we’ve benefited from seeing what works and learning from others’ mistakes. We now have the brand mix in a better place and we can go out with huge confidence to talk about it.”

The next step is to bring Arnotts’ multichannel offer in line with its new customer relationship management technology by launching a mobile-responsive website in October. Hernan will not reveal the exact investment but describes it as “significant” and is aiming to increase online sales from 3% to 10% of total revenue within three years, calling the website a “huge opportunity” to leverage the Arnotts name.

“Our ecommerce business is growing exponentially, already up 60% on last year. We recognise the need to go multichannel, it’s not just about bricks and mortar anymore. Expanding our offering online and promoting arnotts.ie across the country is essential moving forward,” he says.

The 171-year-old store is in a “solid position” to take advantage of Ireland’s recovering economy and although consumer confidence is still fragile, green shoots are appearing, according to Hernan. He expects 2014 to be the best in six or seven years for the business, and is already seeing “good growth” in the first half. In the company’s most recent results for the year to January 27, 2013, like-for-like sales were up 2.1% to €117.2m (£93m), with EBITDA up €514,000 (£408,000) to €4.3m (£3.4m).

Christmas is already looming large for Hernan, with Arnotts’ campaign (in newspapers, magazines and radio) set to launch in mid-October, two weeks earlier than last year.

“Christmas is a key part of any retailer’s year and it will be bigger, better and bolder in Arnotts this December. We have a very solid foundation in terms of product in store to benefit from the upturn that’s coming in the Irish economy. We’ve got through the worst and now we want to continue to enhance our existing brand offering and deliver what the customer wants. We are repositioning for the future and we’re already seeing the fruits of those changes.”

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