Home shopping specialists Freemans Grattan and Redcats are both working to revamp their businesses as online sales grow. Retail Week takes a look at how the companies compare.

Freemans Grattan

Owner Otto Group

Chief executive John Hinchcliffe

Sales £172.3m (year to Feb 2013)

Pre-tax loss £5m (year to Feb 2013)

Retail roots The business in the present form was established in 2009 after Grattan and Freemans were restructured by German owner Otto Group.

Grattan was founded in 1912 and went public in 1935. The business, which was owned by Next from 1986 to 1991, largely traded through two catalogues aimed at women between 25 and 45.

Freemans opened in 1905 under the strapline ‘Bringing the high street to your door’ and was briefly owned by Sir Philip Green in 1999. Otto Group acquired Grattan in 1991 and Freemans in 1999.

Strategy The recent restructure was designed to simplify operations to restore profitability and focus on ecommerce. Losses have narrowed, so it appears to be working. The two fashion brands were distinct when they launched, as Grattan targeted an older demographic than Freemans. Now their sites are identical. Both offer goods on credit. They sell though their own catalogues and websites, as well as two clearance stores, down from an historic 30, and a dedicated clearance website.

Chief executive John Hinchcliffe took the top job in 2012 and moved the retailer’s head office to a Grade II listed former wool warehouse on the edge of Little Germany in central Bradford. The group was slow to embrace online, and launched its first pure-play brand, Oli, in 2007 with a focus on fashion and a strong editorial feel.

Over the last three years the business has launched two new sites – Curvissa, a plus-size site, and a dedicated swimwear website that launched in 2012.

Redcats UK

Owner Kering SA

Chief executive for La Redoute UK Saida Gallouj

Sales £72.7m (year to Dec 2012)

Pre-tax profit £1.8m (year to Dec 2012)

Retail roots Redcats UK, formerly known as La Redoute, has been at the changing face of fashion retail as catalogue shopping moved online.

The acquisition of Empire Stores in 1991 by La Redoute, which was founded in the 1870s, was a key moment in the latter’s history.

The deal meant it took on Empire’s twice-yearly catalogue and La Redoute aimed to expand the business by adding new lines.

However, sales at Empire slumped by more than £100m between 2000 and 2006 and it was sold to Shop Direct in 2008.

Strategy Redcats is the holding company for brands including La Redoute and kidswear etailer Vertbaudet. The business is going through a period of uncertainty after French owner Kering put it up for sale to focus on its more lucrative luxury and sports businesses.

Redcats made a pre-tax loss in 2009 and since then has been focusing on streamlining its business to achieve profitability. It succeeded but did suffer a setback in 2011 when pre-tax profits tumbled from £3.9m to £19,000.

The business sells through websites and catalogues.

Redcats has been striving to reposition as an online specialist.

Online sales accounted for 68% of revenue at La Redoute and Vertbaudet in 2012.

Newer brands Ellos and OneStopPlus – a Swedish designer specialist and a plus-size label respectively – have broadened the offer.

All of Redcats’ brands are in double-digit growth online.

The Retail Week Knowledge bank verdict

Wendy Massey, Retail Week Knowledge Bank analyst says: “The structural changes at Freemans Grattan since 2008/09 have moved the group significantly closer to profitability and Freemans – its largest component – almost broke even in 2012/13. The integration into Grattan accounts of the small Witt operation in the UK should also have a positive impact from 2013/14 as the restructuring process moves towards completion.

“While the strategy of achieving higher profitability at a lower level of revenue has seen sales decline by more than 40% since 2008/09, Freemans Grattan is still a £170m business. Its long-term future is probably looking more assured than Redcats, which also has the major issue of future ownership to contend with. While Redcats has been in the black since the sale of Empire Stores in 2008, it is now a very small operation in this country – less than a fifth of the size it was in the early 2000s – and likely to decline still further if La Redoute follows Vertbaudet into management hands and eventually gets hived off.

“There is clearly a point at which the strategy of scaling back sales to achieve higher profitability is no longer viable.”