Retail boss speaks out about strategy as suitors circle business.
Aurum has enjoyed a record year of sales and as the retail group teeters on the brink of a sale to a mystery investor, chief executive Justin Stead meets with Rachael Taylor to discuss his plans for the future of the business and reveals some of his strategies for success.
Justin Stead has remained behind the scenes for some time, at least where media dealings are concerned. And while the past three years have been frustrating for those of us trying to track him down for an interview, you can imagine why he would want to stay quiet.
Aurum, where Stead is chief executive, has had a roller coaster of a few years after getting caught up in the Icelandic bank crash. In 2009 the group’s Icelandic shareholder Baugur put its UK arm into administration and the rumour mill began to work overtime as Aurum called in Ernst & Young to conduct a business review, with suggestions of a sale. A corporate restructure followed leading to Aurum trading off £200m of debt with Icelandic bank Landsbanki for a fuller share in the business. Therefore the jewellery and watch retail group is now owned jointly by the resolution committee of Landsbanki, chairman Don McCarthy and some of the Aurum management team.
While the original suggestion of a sale never came to fruition, the time has now come to sell the business, just as Aurum is celebrating a year of record sales at its retail outlets Mappin & Webb, Watches of Switzerland and Goldsmiths. In the year to January 30 the group posted sales of £280.6m from a network of 165 stores, up 16.6% like-for-like. Then at the end of July the group released a trading update that showed sales in the six months following registered a rise of 11% in the 25 weeks to July 24. The result is that the business is now in such rude health that analysts expect it to fetch a price tag of at least £200m.
When Professional Jeweller meets Stead in the newly revamped Mappin & Webb showroom on London’s Regent Street the man of mystery turns out to be very charming indeed. After graciously posing for our photographer, he then apologises for having been “very quiet the last few years”, but that he is now “ready to talk in the right way”.
Stead was born in Australia and so has that easy-going nature stereotypical of Antipodeans, and it is a surprising attitude to find at the top of a business that has closed its doors to the press in the past. And now that he is ready to talk, he does so very frankly.
“We are running a very difficult race,” he states. “In a difficult environment it is incredibly challenging. The consumer nowadays is very discerning and the more impulsive buyers have subsided a lot.”
Stead joined Aurum as chief operating officer in 2006, but when Goldsmiths founder and former chairman and chief executive Jurek Piasecki fell out with the Aurum board 18 months later, Stead stepped up to take over his role and went on to become chief executive of the retail group. He joined Aurum on its journey and was at the forefront when the business was bought back by management, in partnership with Lansbanki, three years ago.
“The interesting thing when we took the business over is that we were quite definitely in very different circumstances,” he says. “It was very clear from the start that it was our vision to set about putting in definite structure.”
Stead has led the business from strength to strength and it has become one of the few recessionary success stories on the high street, despite a shaky start. As a former professional tennis player, Stead understands the importance of a strong team; while a tennis player stands alone on the court, we all know that there is a hubbub of trainers, coaches, physios, nutritionists and more who have helped that lone player to get where they are.
Aurum has a fantastic team, boasts Stead, but this has not always been the case. “Staff motivation was bad,” he admits. “The ones that were there were definitely not engaged or were unsure of what to do.”
Stead is a true believer in the power of a good team and as “a hands-on boss” – his words – he set about making changes to improve morale. Incentives introduced included changing company packages and bonus schemes. He believes by recognising and addressing the problems rather than ignoring them he has managed to reinvigorate the business, although he is keen to remind us that Aurum “is not a one-man band”.
“If I had to say what my one satisfaction is, it would be that we have the total engagement of the team, all 1,800 people who work for us,” he says, beaming as he does so. “If you get people motivated in the right way then the sky is the limit.”
With a strong team around him, a good set of results in the bag and a number of investors eyeing the business, Stead’s focus is on growth.
While he remains enigmatic about who the new owner of Aurum is, Stead hints that the board has already selected one. He won’t officially confirm that the deal has been done but laughs and says “let’s just say we are evaluating a smaller list”.
“We have had tremendous interest in the business from both international and UK trade and private equity,” he says. “We are working through the interest and getting close to the groups and making an appropriate decision. We are not in any rush. We want to pick the absolutely perfect partner and get maximum value for our shareholders, who have been fantastic. When Baugur crashed Landsbanki restructured our debt and made it very sensible to allow us to grow. The debt structure was planned for five years but we beat that and did it in one and a half.”
One of the conditions of the sale is that the existing management team are left in place, as are the new strategies the group is developing. Stead says that this has been a very important deal maker or breaker when speaking with potential buyers. “Acceptance of our exit strategy has been the most important criteria,” he says. “We will continue on with the existing management team, who we have had a terrific performance from, and if we can continue to perform then we can expect another very strong year.”
The strategies that Stead and his team are putting in place are not only devised to replicate its recent success, but to build on it. Aurum has four main retail brands and has plans for each one. Mappin & Webb is certainly the Aurum store chain with the most history. Founded in 1774, it is the longest-running of the chains – although Goldsmiths is a close second having been founded in 1778 – and has two royal warrants to its name. Stead plans to build on this heritage to return the brand to its “former glory” – Mappin & Webb once had stores all over the world – and use the strengthened position to take it global.
“There is a huge tradition in Mappin & Webb and we are morally obligated to bring it back,” he says.
Aurum has revamped the store on Regent Street, which was the first the chain ever opened, with a fresh contemporary look – it even has light-hearted chart music playing in the shop to attract younger shoppers – while holding onto its luxury values. This new look will be rolled out to all Mappin & Webb stores, new and existing.
“We are planning significant store growth [for Mappin & Webb]; we have 13 stores now and are aiming for 20 to 25 locations,” says Stead. “Mappin & Webb also has huge scope internationally. We need to take the time sensibly and methodically and invest and come back to the forefront. We are really getting our teeth into it and have brought it back to where it once was.”
As well as investing in pushing further into luxury jewellery and watches, Aurum is also tapping into the fashion end of the market with a whole new retail concept: Goldsmiths Boutique. The first of these new stores opens in Westfield Stratford in London this month and will hopefully help Aurum access a younger customer demographic with a product range capped at £300 that will include brands such as Fossil, DKNY, Juicy Couture, Hugo Boss, Police and SuperDry.
“Goldsmiths Boutique is the first of its kind in the UK as it is the first time that someone on a multiple level has been offering something like this,” says Stead. “The store design will have high-tech areas for the kids; lots of theatre. All the people we have hired have come from fashion backgrounds. There will be vending machines with access from the outside, so if a boy is at the cinema and he wants to buy a Lovelinks bead for his girlfriend but the shop is shut, he can use his credit card and buy at the vending machine.”
As well as helping Aurum gain access to a younger shopper, Goldmsiths Boutique will also help it gain access to retail locations where the group has never ventured before, according to Stead. He names St Pancras as one such location, adding that if the Westfield Stratford store proves to be a success the retail concept could be rolled out all over the UK.
Online is also an avenue that Aurum is focusing heavily on. The Mappin & Webb website has just been reskinned, Goldsmiths has a roaring online business and the group is just about to embark on launching a transactional site for Watches of Switzerland, which could become a major player in the online watch retail space.
It seems that after years of uncertainty and a tough struggle back to profitability, Aurum has its house in order. And with a charming and confident leader at the helm, the future looks bright for the retail group, as long as Stead and Aurum stay true to their word that the sale of the business will not interfere with the group’s strategic plans.
“It has been a good journey and it will be a good profitable 2011,” says Stead. “It has been tough on the high street and I am very grateful that I have a fantastic team around me. Before I used to say to my PR team that I was quietly cautious, but this year I’m optimistic.”
AURUM’S SIX-POINT STRATEGY FOR SUCCESS
1. Focus on high-margin products such as gemstones, gifts and gold.
2. Consolidate the group’s watch strength by axing under-performing brands and focusing on increasing sales from a lower-number of key brands.
3. Build up its e-commerce offer and strengthen Mappin & Webb and Goldsmiths’ sites while launching an e-commerce business for Watches of Switzerland.
4. Develop individual retail brands, such as Goldsmiths Boutique, that are contemporary and have a world-class focus on customer experience.
5. Focus on operation efficiency and continue to make cost savings as well as great investments.
6. Invest in people through more staff training and motivational communication seminars for its workforce.
This article was taken from the September issue of Professional Jeweller magazine. To view a digital version of the magazine click here.