Stressful? Strenuous? Sapping? No – there’s an altogether more positive ‘S’ that Richard Pennycook reserves for the Co-op following his turbulent time in charge.
“It’s a special place,” he reflects with a reaffirming nod.
“I’m moving on to other things, which will be equally as exciting, but handing over the reins. I had a few emotional moments.”
Even for a man hardly renowned for expressing an emotive or sensitive side – certainly not in front of analysts or journalists – it is easy to see why Pennycook would have found it tough to walk out of the mutual’s One Angel Square headquarters for the last time.
When he walked in as finance director back in June 2013, it was a business on the brink.
The Co-op’s failing bank – downgraded to junk status by Moody’s and beset by scandal after its chairman was found to be a crystal meth user – had for years been “inextricably linked” to the rest of the group and threatened to bring the entire business down.
Cool in a crisis
“A situation that was urgent for the bank was also a crisis for the whole group,” Pennycook says.
But having passed his first test, to save the bank from collapse, Pennycook was catapulted into the chief executive’s chair by March 2014, taking the baton from the man that had condemned the Co-op as “ungovernable”, Euan Sutherland.
“I hadn’t gone to the Co-op to spend a long time in the organisation and certainly not to run it. I had planned to do a portfolio career”
“I hadn’t gone to the Co-op to spend a long time in the organisation and certainly not to run it. I had planned to do a portfolio career,” Pennycook admits, safe in the knowledge that he has now, rather belatedly, “gone plural”.
“But when Euan left saying the organisation was ungovernable, we were obviously still in a crisis and there was a leadership vacuum. It was very important to step into that vacuum.”
Almost three years to the day since he did just that, the Co-op revealed that Pennycook was stepping down. But he leaves the company in a very different place.
Business sell-offs, governance reforms, board appointments, strategy rethinks, branding refreshes and the membership relaunch have rebuilt the Co-op’s crumbling foundations and created a solid base for future growth.
Indeed, the group’s operating profit for the year ending December 31, 2016 jumped 32.1% to £148m, driven by the success of its rejuvenated food business.
As his successor, former Co-op Food boss Steve Murrells, maps out a vision for the ‘renewal’ phase of the mutual’s turnaround plan, Pennycook can afford to look back on a job well done.
The governance reforms – something he spent the first six months of his leadership campaigning for – were central to his plans to take the Co-op forward.
“What we now have with Allan Leighton in the chair is a top-class board that any PLC would be proud to have,” Pennycook states.
“We had to put that in place, but in order to make those changes, the people who were in the existing governance structure had to vote themselves out of office.
“Ultimately, the reforms went through with an overwhelming vote, but it did take six months of hard work not just to design the new structure, but also to persuade those 600-odd people that it was the right thing for them to do.
“It was pretty intense through weekends and long nights. It’s the closest that I will ever get to a political campaign.
“I found it completely fascinating, but it made me very glad that I’m not a politician.”
Successes and regrets
Despite the relentless days and sleepless nights involved in reforming the Co-op’s governance, Pennycook pinpoints another strategic move as the proudest part of the legacy he leaves behind.
“Putting membership at the heart of the organisation again was probably the biggest single thing we did – a recognition that if the Co-op was to fulfil its purpose, which is championing a better of way to do business for you and your community, then you can’t just be A N Other business,” Pennycook explains.
“Indeed, we would probably fail if we were just competing with normal corporates, but in a way where we are sub-scale and not market leaders.
“One small regret is that the Co-op came along at a time in my career where I couldn’t give another 10 years of executive input”
“So putting membership right at the heart of the organisation and taking colleagues on that journey is probably the thing that I take most satisfaction from.”
Yet, in spite of his plethora of achievements, Pennycook candidly opens up about a couple of regrets stemming from his time at the mutual.
“One small regret is that the Co-op came along at a time in my career where I couldn’t give another 10 years of executive input,” he says, wearing the heavy heart he left the Co-op with on his sleeve.
“Because I’m very proud of the team there, I’d have loved to have thought about giving a really long stint. If the Co-op had come along 10 years ago, it might have been a different story, but that’s life.
“Apart from that, probably the only regret is that what we had to do to rescue the Co-op meant selling some very good businesses.
“We’ve ended up with a portfolio of really good businesses, but along the way we had to sell farms and the pharmacy business.
“We wouldn’t have chosen to do that, but we had to do that to repair the balance sheet.”
From food to Fenwick
Given the rollercoaster of a ride Pennycook went on at the Co-op, it is perhaps understandable that he dismisses the chances of him taking on another chief executive role as “very unlikely”.
But as far as his love affair with retail goes, that is far from over yet.
Today, at Fenwick’s AGM, Pennycook will be officially named as the department store group’s chairman – the first from outside the founding family – adding to his existing chairmanships of The Hut Group and joinery juggernaut Howdens.
For Pennycook, the move marks a return to his retail roots, almost three decades since taking his first steps in the industry.
“This takes me back to the start of my retail career. I started with Allders when it was bought out of Hanson. At that time, Allders of Croydon was the third-biggest shop in the UK”
“Fenwick was very attractive to me because of the values the family adopt in terms of the way they operate, and we’ll be hugely respectful of those going forward,” Pennycook pledges, already sitting comfortably in the directors’ offices on the sixth floor of its Bond Street store.
“This takes me back to the start of my retail career. I started with Allders when it was bought out of Hanson. At that time, Allders of Croydon was the third-biggest shop in the UK.
“When I walked back into Fenwick Newcastle, it all came flooding back.”
The department store landscape may have undergone a tectonic shift in the 25 years since Pennycook joined Allders, but the former Morrisons man is alive to the challenges Fenwick faces.
“We’ve seen so much channel shift going on, particularly in commoditised categories,” Pennycook explains.
“What we see now in department stores is the continuing importance of fashion and beauty departments, but less so in electronics or toys, where frankly you are beating your head against a wall if you are trying to compete with the online players.
“Taking some of that space is more experiential opportunities, whether that’s expanding the beauty offering to spa treatments, or catering and food.
“We have the flexibility within our spaces to be able to move with customer demand. That is one of the great strengths of the department store model.
“Before taking on the role, just looking around the stores, I was very impressed with the trader instinct and the service proposition that Fenwick brings to the market. I think there’s still a very good place for department stores in the 21st century.”
Despite his optimism, last year’s demise of former high-street stalwart BHS and the gargantuan struggles facing the likes of Kmart and Macy’s in the US offer stark warnings for the department store model.
But an adamant Pennycook insists: “The best retailers are those that can adapt.
“The British Home Stores experience is salutary for everybody in the sense that, if you fail to keep up with customer demand, if you compromise on quality, over a period of years the customer punishes you for that”
“The British Home Stores experience is salutary for everybody in the sense that, if you fail to keep up with customer demand, if you compromise on quality, over a period of years the customer punishes you for that.
“We have to rise to the challenge. We have to continue to show the customer there is a good reason why they would get up off the sofa and actually visit a store to get an experience they can’t get through purely digital means.
“Shopping at its best has always been an experience that the consumer enjoys.
“Where they can get great experiences, which department stores can offer, they will keep on coming.”
If Pennycook can work the same magic in department stores as he has in food, Fenwick will flourish.
Pennycook’s Co-op career
June 2013: Richard Pennycook joins the Co-op as finance director
March 2014: Following Euan Sutherland’s acrimonious exit, Pennycook is parachuted in as interim chief executive officer
July 2014: The Co-op agrees to sell its pharmacy business to Bestway for £620m
August 2014: Another disposal is agreed as its farms business is offloaded to the Wellcome Trust for £249m
August 2014: The Co-op reveals its proposals to reform its governance structure, which include creating a board of directors elected by members and moving to the ‘one member one vote’ concept
September 2014: Pennycook’s position as group chief executive is made permanent
April 2015: The mutual returns to full-year profit and net debt is reduced by £600m. Pennycook hails the end of the ‘rescue’ plan and says the ‘rebuild’ phase of the turnaround plan is under way
May 2015: The Co-op holds its first AGM under the new One Member One Vote governance system
April 2016: Its preliminary results bring a rise in underlying pre-tax profit, as its core convenience food business grows ahead of the market. Pennycook requests that his remuneration package is reduced
July 2016: The Co-op agrees to sell 298 of its smaller food stores to McColls for £117m
September 2016: The Co-op relaunches its membership scheme, which attracts 400,000 new members by the end of the year
February 2017: Pennycook reveals he is stepping down as chief executive