Reiss’s founder is still calling the shots, and after getting the chain back on track he wants to take it further upmarket.
Reiss is going into 2015 a changed business. Following a tumultuous year ending January 2013, during which UK EBITDA fell 36% year on year to £7.2m and the business made a pre-tax loss of £6.2m, the men’s and women’s premium retailer is back on track, and expects to report its best-ever results for the year ending January 2015. International expansion is next on the agenda, with a host of store openings planned, including two flagships in Europe.
Behind this turnaround is the inimitable David Reiss, who founded the business 40 years ago and remains its managing director. He describes himself as a “trader”, a “merchant”, a man who believes firmly in product, hiring the right people and, of course, protecting the bottom line. The losses in 2012 represented a low point in his career, he says.
He is clear about what went wrong in 2012. The company’s non-executive committee suggested bringing in an extra layer of management to support ambitious plans to have 250 stores globally within three years (from the 50 it had at the time, in 2005). “They said if you want to really drive this business and take it to a certain level you have to bring on a different breed of people. And I took it on board,” he explains.
It was against his better judgement, he says, which turned out to be right. Profits took a hit and the culture deteriorated. “It was like a juggernaut came through our business,” he grimaces. “We’re a hands-on business, all about rolling your sleeves up and making things happen. And what we found was that this senior layer of management was totally divorced from the day-to-day issues.
“For the first time, we had product in our stores that wasn’t what Reiss is about - trend-led rather than timeless pieces. We weren’t allowed to move stock around between stores, even though some of our key stores were desperate for product they’d sold out of.”
So, one year in, Reiss decided to shake it all up. “We looked at it and said ‘Let’s get leaner and meaner, shake up the central overhead structure’.” He looks down at a Post-it note handed to him by his retail director Tracy Dixon. “I asked her to find out what the savings were in the first year - 17%, which I think equates to over a £2m saving in central overheads.”
He will not say how many extra people were brought in at the time, but the executive team has since been reduced by five. Among those to exit the business in early to mid-2013 were commercial director Sanjay Sharma, trading director Gwynn Milligan and womenswear creative director Manuela Morin - although Reiss will not clarify if they were part of the shake-up or left of their own accord. Sharma joined in the newly created role of international director in October 2011, was promoted to commercial director (another new role) in March 2012 and left a year later. Milligan was appointed to the new role of trading director in May 2012 but left after eight months, while Morin joined initially as creative head of accessories in September 2011 and had departed by mid-2013.
Shortly afterwards, in May 2013, brand director Andy Rogers and ecommerce director Dan Lumb stepped down after five and two years respectively. The following December, Reiss appointed his first creative director, promoting menswear director James Spreckley into the role. Spreckley, who has worked for Reiss for more than a decade, is now responsible for ensuring consistency across Reiss’s design and campaign imagery, stores and website.
This streamlined management structure seems to be working. Reiss doubled its profits in the year to January 31, 2014. Sales excluding franchise retail were £116m, up from £106m the year before, leading group EBITDA to double to £9.2m, while UK EBITDA rose 42% to £10.2m. And it expects to double group profits for the year to January 31, 2015.
“What’s been exciting is [the changes in 2012] got immediate results,” says Reiss. “Last year was the first year after the change and we doubled our profits - this is the second and we’ve doubled them again. We’re coming out with quite a unique proposition: we’re cash-free, we have no borrowings, we don’t have any loss-making stores. If we look at the product, the merchandising division, the in-take margin and the sell-through, it’s a very clean business.”
Reiss is still confident the company can achieve its goal of opening 250 stores. Across 13 countries it now has 132, including franchises, of which 79 of are in the UK. It plans to open its first stores in the Philippines in 2015, plus its first Canadian store in three months’ time, followed by a second later in the year. Other openings will include more franchises in India in the latter part of the year and a flagship in the World Trade Center, New York. Australasia is earmarked for expansion in the second part of the year, as are more stores in the Middle East.
“We held back on the expansion plan until the infrastructure was in place. After this year’s trading, we feel we’re ready,” says Reiss. He is recruiting an international manager to lead the charge.
The company will open a couple of flagships in Europe this year, to test the market. At the moment it trades from department stores Karstadt in Berlin and Munich in Germany, and De Bijenkorf in Amsterdam, Den Haag and Rotterdam in the Netherlands. It also has stand-alone stores outside the UK in Dublin and Kildare in Ireland and Kiev in Ukraine. “If the flagships are successful, we’ll look at Europe very seriously,” says Reiss. One of the flagships is likely to be in Germany, but he will not be drawn on the second site.
While many UK retailers have failed to crack the US, Reiss made it look easy. Its 5,000 sq ft store in SoHo, New York, opened 10 years ago and has traded successfully ever since, growing to 19 stores. “America’s the most challenging market in the world - that’s why so few people succeed,” says Reiss. “They’re always on promotion.” So how did he make it work? “I’d been travelling there for years, and most of the time if I wanted to buy anything I had to go to department stores. There were very few individual stores offering something special. I saw a GAP in the market.”
Back in the UK, a store at Heathrow Terminal 5 will open in March, but otherwise Reiss is happy with the domestic portfolio. “All of our UK stores make a profit, even the smaller ones.” The focus is instead on organic growth. For example, a new, more minimalist retail concept has been rolled out to seven stores (15 including non-UK stores) and the retailer will almost double the space it has in the Brent Cross shopping centre in July from 1,700 sq ft to 3,200 sq ft, adding menswear to the mix.
Despite being a diehard advocate of bricks and mortar, Reiss admits ecommerce is becoming “a major part” of the business, representing 20% of sales. This coming financial year, he will invest in excess of £1.3m in a new ecommerce platform, to make the website and mobile experience slicker.
Product is an ongoing focus for Reiss, who runs the company in a similar way to a designer fashion house, with an in-house atelier at its central London headquarters and 20 in-house designers. “Most of the product is Reiss product,” he points out. “We nod at trends and make sure a part of the offer is key shapes for the season, but we do it in our own way.”
This year, he will attempt to raise the collections - which range in price from £59 to £995 for menswear and £59 to £1,400 for womenswear (the latter for a shearling coat) - to a more aspirational level. “We’ll still have the entry price points, but I’d like to take it as far as we can. We can take dresses up to £500, £600 or £700, as long as that dress is an aspirational dress that one would expect to pay £1,500 for.”
Reiss is often asked if he is planning to sell the company. He is approached all the time, but insists he still has “unfinished business”. However, he adds: “When the time is right, there’s enormous growth potential in the brand.”
It has often been noted that Reiss’s three children decided to take their own career paths rather than follow their father into fashion. However, one of his sons, Darren, is now on board in an observational capacity. “He has his own business, but I’m getting him involved so he understands the nuts and bolts. The great thing is he gets it.”
However, his son is not being groomed to take over completely. Reiss is on the lookout for a “product person” who could lead the company in his place. “If I took on board a chief executive, it would have to be somebody who has that trading background, ideally, who has global experience of building brands.”
But one womenswear chain’s chief executive says: “[Reiss] has done a really nice job positioning the business and brand, but he’s been building it up around him; it’s all about him. He wouldn’t let go of the reins.”
“It’s not an easy one,” Reiss admits. “The culture in this business is quite unique; you have to fit. I haven’t yet met the person I want to sit in my chair.”