When Stuart Machin took the top job at Steinhoff-owned Bensons for Beds and Harveys last August, he knew he had his work cut out.
With consumer uncertainty pervading the market and currency fluctuations battering bottom lines, some furniture retailers were already beginning to crack.
Retail park stalwarts Furniture Village and Carpetright reported declining profits last year, and conditions forced even strong and steady DFS to issue a profit warning.
Ultimately, the pressure proved too great for some. Sofa specialist Multiyork and its stablemate beds retailer Feather & Black both collapsed into administration late last year.
Unperturbed, Stuart Machin – a grocery and fashion veteran and former boss of Australian department store Target – promptly set about re-upholstering the two undernourished but well-known furniture brands.
What he did not know, however, was what else lay just around the corner — an accounting scandal at Steinhoff that would force the Bensons and Harveys parent company to the brink of collapse and further pull the rug out from under Machin’s newly planted feet.
“It’s been a challenging couple of months,” Machin admits in an interview with Retail Week at the furniture retailers’ new concept stores at a retail park in Wednesbury.
As well as the firms’ credit insurance being cut and suppliers getting cold feet, the Steinhoff headlines have deterred some shoppers — particularly those browsing made-to-order items with a long lead time.
“To be candid,” Machin says, “the Bensons business has been tracking ok, but the last three weeks in Harveys, which was showing some green shoots of improvements, have been particularly challenging.”
“I’d be naive to say everything is business as usual, but I’m feeling really optimistic”
The uncertain future of the retailers’ owner has also inevitably led to some distraction on the shopfloor.
But Machin has admirably stifled the flames during this unexpected outbreak, reassuring staff and focusing on his new strategy.
“I’d be naive to say everything is business as usual, but I’m feeling really optimistic. Situations like this happen and you’re incredibly disappointed, but you learn from them and you move on,” he says.
“I’ve learnt in the past few years that you play the cards you’re dealt and just worry about the business and the people you’re accountable for.”
The new furniture boss has even found opportunities in the Steinhoff fog. He says, for instance, that the crisis has given the business “a real cost conscience and laser focus”.
He also notes the “tremendous personal support and leadership” from the boss of Pepkor Europe, Poundland’s owner, Andy Bond, as well as the “upbeat attitude and loyalty” of Harveys’ and Bensons’ employees.
Furnishing the accounts
Last week a lifeline was flung Harveys’ and Bensons’ way in the form of fresh funding from US investment firm Davidson Kempner.
Although the scandal very much rumbles on in the background, Machin regards the £180m loan – to be divvied up between five Steinhoff-owned firms – as a positive step, representing financial freedom from its beleaguered parent while its fate is decided.
It has not yet been decided how large a slice Bensons and Harveys will receive, but the arrangements have enabled Machin to assuage the concerns of “most” of its suppliers.
“We are now in a strong position and we continue to work with the credit insurers to reinstate cover and suppliers on returning to business as usual,” he says.
“That will be a big relief because we were very concerned about that.”
“We have not yet had any discussions about selling the business”
He says it has also restored the company’s “confidence in the marketplace” and “really lifted the spirits again”.
Of course, the situation that caused Steinhoff’s share price to crash 85% cannot be entirely forgotten about.
But, for Machin, the eventual outcome — which could result in the South African conglomerate being broken down by country or new ownership models emerging — is not front-of-mind as he focuses on controlling the controllable.
The very real possibility of the furniture businesses being sold is “not on his agenda”, he claims, despite Steinhoff being under pressure to shed $1bn worth of assets.
“It’s not something we’re prioritising,” Machin insists. “We have not yet had any discussions about selling the business”.
Instead, Machin has kickstarted his turnaround plan for the furniture firms.
“We’re very focused on cracking on and delivering a multi-year transformation at Harveys,” which he admits is “not doing as well as it should”.
“There’s quite a bit to be done at Bensons too,” he adds.ensons too,” he adds.
Revitalising Bensons and Harveys
Machin makes abundantly clear that he has not scaled back his ambitions to revitalise the furniture businesses.
“Our plan was never to spend a load of capital,” he says. “Our plan was to spend where we needed to spend, and we will still invest in the areas where we can get a good return.
“The real retailer disruptors are the value operators, businesses with a very strong ecommerce strategy and those that can get product to you really quickly – giving shoppers instant gratification.ecommerce strategy and those that can get product to you really quickly – giving shoppers instant gratification.
“So we’ve got to invest in great all-year-round value, our ecommerce “So we’ve got to invest in great all-year-round value, our ecommerce business and reducing lead times.”
Machin, who started his retail career on the shopfloor in Sainsbury’s aged 16, has already begun simplifying the Bensons and Harveys pricing models.
He has introduced all-year-round low prices and is deliberately steering the business away from “chaotic promotional activity, gimmicks and value destroyers”.
“The whole furniture market is very promotional and shouty,” he says, “but what’s been encouraging is how well we’ve done on our new every day low pricing.”
He explains that the Harveys team has already reduced the number of price points on its occasional range from 29 to eight, while the Bensons team removed 13,000 product options that have never been purchased by a customer.
The flip side, he explains, is that every day low prices don’t come with the same urgency to buy and excitement of a typical 50% off furniture Boxing Day Sale, and what was a new-found strength before Christmas meant that the retailer “didn’t quite get the Boxing Day [it] wanted”.
But Machin is confident that the new strategy will bring “more consistent” sales and “big cost savings”.
“And we’re no longer blocking the windows with red and white banners and promotional messaging,” he adds.
Stores not showrooms
On the instant gratification front, Machin is eager to satisfy the younger, design-conscious shopper it is targeting by cutting lead times.
He hopes to do this by bringing more manufacturing to the UK and Europe and making better use of Bensons and Harveys’ ample store space.
This includes holding more stock and ‘take-away-today’ items, as well as accessories.
“In the future, I wouldn’t buy big stores – we’re more focused on online than anything else,” Machin admits. “But we’ve got lots of space so we need to utilise it.”
“We need to treat them more like retail stores than showrooms. There’s an opportunity in Bensons to become famous for all things bedroom, including furniture and accessories, not just beds and mattresses.”
This change of direction and its new pick-up lines have broadened the retailer’s competition, which now includes Argos, Next Home and Dunelm.
Playing catch-up online
After experiencing the outmoded Bensons online shopping process first hand, Machin is determined to fix up this part of the business, “facing into the problems that customers have had with our delivery service and our complicated sales processes”.
“I ordered my bed online and it really wasn’t the best experience,” he says.
While a lot of work has been done to rectify its ecommerce proposition, there’s more to come. ecommerce proposition, there’s more to come.
“We’re just finalising the development to allow shoppers to select their delivery day and, from February, we will be offering weekend deliveries,” he says.
But despite the online push, Machin insists he has no plans to radically overhaul the store estate, which consists of 261 Bensons for Beds stores and 153 Harveys.
In pictures: Bensons and Harveys get reupholstered
“We’re not rapidly closing. I’ve closed a few shops in my first few months and we will close a few more.
“Do I want more stores? No. But we’ve got good stores in good sites, and they are not too big, so we’re fortunate.”
Admitting that there’s still “a big job to do” to transform the economics of the businesses and increase profitability, Machin reaffirms that his sole focus is on that, and that alone.
The Steinhoff crisis may still be blazing, but Machin is making headway in extinguishing the flames at its UK furniture firms.