Despite the general air of doom and gloom blighting the high street, some low-profile retailers seem to be doing just fine. Charlotte Hardie reveals a selection of retail’s secret success stories
Did you know that Farmfoods is the UK’s fastest growing grocer and has more customers than Netto?
No, neither would most people. This is because the discount food retailer is among the hidden jewels of the retail sector. In other words, one of a handful of businesses embarking on major expansion programmes, mostly notching up double-digit increases in like-for-likes and pre-tax profits, and doing it all quietly away from prying eyes.
Some are deliberately secretive – Farmfoods being a prime example. The most that anyone from the discount grocer would say for this feature is that “Eric [Herd, chairman] prefers not to give interviews or talk about the company. You will have perhaps noticed there have been no features in the past.”
Or what about HobbyCraft, which has managed a 122 per cent increase in profits in the 10 months to January? Chairman Warren Haskins readily admits that since the business launched 14 years ago, it has until very recently deliberately kept quiet.
“It’s been a conscious decision,” he says. “We’ve been excited by what we’ve been doing and keeping our heads down, but we’ll have 40 stores open by the summer and we feel now it would be a very brave retailer to take us on.”
But the reason for others’ low profile is often that they have simply slipped beneath the radar. Simon Arora, managing director at discount retailer B&M Bargains, didn’t want to discuss his business for this feature, but did say: “We have little brand recognition, due to the secondary nature of our sites.” The fact that several of these retailers are regional, such as northern retailer Heron Frozen Foods, makes it easier to go unnoticed too.
The success of several of these retailers is being aided by the consumer shift to value. In fact, Planet Retail analyst Robert Gregory says Farmfoods’ growth only really picked up last year. “After years of mediocre growth it switched around,” he says. At HobbyCraft, the average transaction is below£15. Haskins says: “In recession, people spend more time at home and have more time to pursue hobbies. People turn to us when times are tough.”
But not all of retail’s low-profile stars are growing purely on the back of a recession. The Range sells everything from home furniture to fishing equipment to musical instruments. As Gregory says: “It’s a destination store with an excellent product range and an extremely low price point.”
Verdict analyst Neil Saunders also sees its charms. “People never quite know what they’re going to get and that drives them to come back,” he says. “It’s a good proposition because it’s very good at creaming off business from some of the more specialised players.”
Oliver Bonas is helped not only by its proposition – gifts, homewares, jewellery and fashion – but also by its store locations on affluent London high streets such as those at Angel and Clapham. Saunders says: “These are the type of stores where you drop in and buy something on impulse.” There is also further growth potential in upmarket towns outside London, he adds. The retailer’s only store outside the capital so far is in Windsor.
As more retailers go into administration or rein in expansion, it will become easier for these secret successes to expand. With discounters, many landlords who would previously have dismissed the idea of them joining their space now welcome them with open arms, and Heron and B&M Bargains have already emerged in the race to take Woolworths stores.
So how will they fare after the downturn? Saunders predicts they will all be larger but will remain niche. “They are never going to be mass market, but they’ll be well-recognised players that will do very well,” he says. But whatever their future prospects, many seem likely to remain as tight-lipped as ever.
Heron Frozen Foods
Unearthing information about Hull-based value retailer Heron Frozen Foods is very difficult indeed. Neither the retailer nor its parent company, Heron Food Group, has a website. It’s virtually impossible to even find a head office number without first knowing its address. There is also a dearth of news clippings on the retailer. Retail Week revealed last month it had acquired between 15 and 20 Woolworths stores. Other than that, pretty much the only information to be gleaned is the founding Heuck family’s annual appearance in Yorkshire’s Top 100 Rich List (2007 estimates put their wealth at around£30m).
Despite its exceptionally low profile, the business is doing a roaring trade. Latest figures filed at Companies House show that for the year to December 19, 2007, pre-tax profit leapt 33.3 per cent to£6.15m. In the current climate, it is likely that increasing numbers of shoppers will flock through its doors.
HobbyCraft has proved that arts and crafts is a lucrative business if you get it right. In January it reported that its pre-tax profits soared 122 per cent to£6.1m in the 10 months to January 4, while sales increased 10.1 per cent to£57.3m.
Founder Warren Haskins launched the first of 29 stores 14 years ago, in one of his family’s garden centres – the 125-year-old Haskins group.
HobbyCraft is among the many retailers to have benefited from tough economic times. In the run-up to Christmas 2008, consumer features were awash with advice on how to save cash by making cards and decorations. HobbyCraft, without fail, was listed as the stockist of choice. A typical store stocks 35,000 arts and crafts products and caters for more than “250 different activities” under one roof, from framing to knitting.
Since its 1993 launch, the 24-store gift, fashion, jewellery and homewares retailer has been growing its business steadily. Latest available figures show a 25.2 per cent increase in pre-tax profit for the year to December 2007. It opened seven stores last year and turnover was predicted to reach about£9m, up from£6.6m.
Oliver Bonas finance director Tim Hollidge says: “We haven’t specifically targeted our name because we like to be people’s local shop. People view it as their secret.” He adds that one of the reasons for its success has been its buying strategy: “For us to keep going we have to source products that are different and exclusive to us.”
Many might say there isn’t a lot going on in the town of Cumbernauld, Lanarkshire, that has twice been voted the most dismal place to live in Scotland. It is, however, home to the 300-store discount food retailer whose sales growth towards the end of last year outstripped many of its rivals.
Unlike Aldi or Lidl, which actively promote their value credentials, Farmfoods has quietly watched its sales skyrocket. TNS figures last year showed a 23 per cent sales rise for the 12 weeks to October 5. Chairman Eric Herd, who owns a majority stake, is not one for bells and whistles – you could browse its website in 10 seconds. But Verdict’s consumer survey estimates it is visited by up to 5 per cent of all grocery shoppers regularly. The figure for Netto is 4.3 per cent.
The success of Poundland and 99p Stores is splashed all over the papers. But one phenomenally successful value retailer that often goes unnoticed is Blackpool-based jack of all trades B&M Bargains – formerly Bargain Madness. Its 89 stores stock about 70 per cent groceries and 30 per cent non-food, including toys, household items and garden furniture. Last year, like-for-like sales rose 9.4 per cent for the year to July 5, while overall sales rocketed 96 per cent.
As other retailers halt their expansion, B&M Bargains is on the acquisition warpath. In the past six months alone it has added 23 stores to its portfolio and this year it took 20 former Woolworths stores. It clearly keeps tabs on struggling retailers’ sites. Last year, managing director Simon Arora said: “We offer a great opportunity for independents to exit their business, achieving a good price for fixtures and fittings and protecting the employment rights of staff.”
Founder Chris Dawson is the closest thing to a real-life Del Boy Trotter you are likely to meet. He left school at 17 with no qualifications to become a market trader and met his wife while trying to flog her a watch. Dawson is said to rarely leave the house without a couple of watches or perfume bottles to try to sell against a meal. Personality aside, he has built up a remarkable business, last year becoming Ernst & Young’s south region retail entrepreneur of the year. He plans to expand the 33-strong superstore chain, which sells everything from paint to water slides, to 160. Figures filed at Companies House show that for the year ending January 27, 2008, sales rose 15 per cent.
Three years ago, Dawson’s late mother was interviewed about her son. Asked to explain his job, she replied: “He flogs things – but he does it very well.” Her comment, it must be said, is a succinct analysis of the essence of good retailing.