LONDON — If mass fashion retailers were royalty, Philip Green would rule Britannia.
This story first appeared in the March 24, 2003 issue of WWD. Subscribe Today.
The billionaire businessman is Britain’s highest-earning individual, sells more women’s clothing than anyone else in the U.K. and acts as buying director — among other things — for his privately owned British Home Stores chain. He even still writes the weekly markdowns for his stores.
Even now, as Green hammers out new strategies for Arcadia, the U.K.’s second-largest clothing retailer and parent of Topshop, which he bought privately last fall for $1.36 billion, he’s developing Santa Claus dolls for Christmas 2003 and pricing bras for BHS.
If that weren’t enough, early last month he filed a bid proposal to the U.K.’s Office of Fair Trading for the U.K.’s fourth-largest supermarket chain, Safeway PLC. Other Safeway suitors include Wal-Mart’s U.K. subsidiary Asda; Britain’s two largest food retailers Tesco PLC and J. Sainsbury PLC, and Wm Morrison Supermarkets PLC. Green last week gained a major edge over his rival suits for Safeway when the OFT allowed his bid to proceed while referring all the others to antitrust authorities for review, which would delay them for months. Wm Morrison’s bid actually lapsed on the referral.
Green’s surprising vault to the top of Safeway’s bidding heap is a perfect depiction of how he’s both beaten the odds and been underestimated throughout his career. “You’d be surprised what you can get done in an hour, if you’ve got a purpose,” said the self-taught, self-made Green in his bright and unusually quiet office near Baker Street.
“I am 1,000 percent focused on what I do. I’m not into lunches and I’m not into meetings. I don’t do any of that corporate stuff or waste my time with charts, meetings or market research,” added the stocky, gray-haired mogul.
In a British market brimming with publicly quoted fashion retail companies — from Marks & Spencer to French Connection to Laura Ashley — Green, whose retail empire is entirely private, is an anomaly in more ways than one. He defies the mold of the bland British retail executive with his often brash manner and flashy lifestyle — complete with Lear jet and bodyguard and rock-’n’-roll pals.
Last summer, Green, a Monte Carlo resident and friend of Prince Albert’s, marked his 50th birthday with a $7.5 million party in Cyprus where Tom Jones, Earth Wind & Fire and Rod Stewart performed.
There’s no other retailer like him in Britain — and he’d be the first to admit it.
“I’m not in the business of self-congratulation, but there are not many people who could put up $1.3 billion to buy a company,” he said, referring to the Arcadia deal, which took place in September 2002. “That was one of the largest private transactions the U.K. has seen in a long time.”
Green said buying Arcadia, the former public company that controls mass-market clothing chains Miss Selfridge, Dorothy Perkins, Burton, Wallis, Evans and the fast-fashion mecca Topshop, was a unique opportunity.
“The U.K. is not like America. It’s very hard to start up a new brand here. Just look at Gap — it took them forever to open 100 stores. There’s also limited space and land. When I bought Arcadia, I not only bought the brands, I bought 2,000 outlets — which makes $1.3 billion seem like a bargain. Nobody in England really looks at the enterprise value of existing stores.”
Thanks to the Arcadia deal, Green’s share of the U.K. women’s clothing market rose to 12.6 percent from 2.6 percent. By comparison, Marks & Spencer has a 11.1 percent share and Next has a 4.5 percent stake. However, M&S’ total apparel sales of about $5.5 billion a year are still larger than Green’s combined sales of about $4 billion.
But Green is the first to downplay his day-to-day job. “There’s no mystique about retailing. If you have the right product and the right management, then you get customers. If you have bad product and bad management then you don’t.”
The Arcadia deal was the latest in a string of private operations Green has clinched over the past two decades. A high school dropout from north London, Green came from a middle-class Jewish family which is still in the property business. In 1979, he ventured into the clothing business with a store in Mayfair, and in the Eighties, he tried and failed to buy the designer store Browns on South Molton Street. In 1985, he bought the jeans company Jean Jeanie and sold it to Lee Cooper five months later at a profit of nearly $5 million.
Over the next decade he bought and sold discount and department store chains, and sportswear and footwear retail companies. He still owns a 50 percent stake in Mark One, the discount clothing retailer.
But it was in 1999 that the U.K. retail world really began to pay attention. After eyeballing Sears for 10 years, Green bought the U.K. company for approximately $880 million. “I don’t buy things on a whim, and I’m not known to be the most generous buyer,” he said. “The key to buying is knowing that you can’t change what you’ve paid for something.”
In six months, Green made a profit of more than $240 million by selling off the clothing businesses (which, at the time, included Miss Selfridge), financial services and mail-order divisions. The same year, he tried and failed to buy M&S.
Instead, he bought BHS and turned around the chain in less than two years. The company’s margins were nil, while today they’re nearly 12 percent thanks to Green’s flair for cost-cutting, product-sourcing and supply-chain logistics. BHS, a budget shopper’s paradise, sells everything from underwear to home furnishings to takeout sandwiches to hair dryers.
Green said he sees about three-quarters of the product that ends up on BHS shelves. Every Monday, when he returns to London from Monte Carlo — his wife, Tina, and two children, Chloe and Brandon, live there year-round — Green spends about nine hours reviewing sales from the week before.
“I sit down with the merchandising directors, and then do the markdowns myself, division by division, line by line,” he said. “And when I’m not here, I do it over the phone. I have a photographic memory so I know exactly what is being sold.”
Richard Hyman, the chairman of retail research company Verdict who has followed Green’s career, considers him a unique retailer. “He’s able to do the jobs of lots and lots of different people, which means he’s not dependent on layers of management. His command of detail is second to none and he has the ability to make a lot of decisions very quickly. And the key is that he gets them right,” Hyman said.
BHS, which Green bought in 2000 for approximately $320 million, is today worth nearly $1.6 billion. Aside from a success story, it’s also an example of why Green so relishes being a private operator.
“I’m not driven by this British paranoia of like-for-like sales, and I don’t feel the need to run at 100 miles an hour. I’m happy that I have a positive cash flow business in BHS. My ambition is not to open 100 more BHS stores, but to strengthen the categories we’re in, and improve our product lines,” he said.
In contrast with BHS, Green said managing Arcadia will be a stroll in the park. As reported, Arcadia underwent a drastic turnaround over the past three years under its former chief executive, Stuart Rose, who had replaced the American John Hoerner after the retailer plunged into the red.
Green said he has no plans to spin off any of the chains, and the strategy is to run each as a separate business.
“Each brand is clean and already has direction and strategy. I want the brand directors to ‘own’ their brands, I don’t want them to be rag traders,” he said. “They’ll have their own human resources team, their own finance director and be responsible for P&L, visuals and trading.”
Green said his job at Arcadia will be behind the scenes, sourcing fabrics and creating production synergies across the BHS and Arcadia brands. “The changes at Arcadia won’t be visible to the outside world. My job is going to be about making a coat one pound cheaper,” said Green, who, during the interview, is sitting with his back to a clothing rack stuffed with a rainbow of winter coats from BHS and Topshop.
He also said he has no plans to tinker with Topshop, a fashionista magnet in London and a runaway commercial success under brand director Jane Shepherdson — annual sales were $525 million for the 287 Topshop units. Indeed, Shepherdson said she feels as if she has complete autonomy under Green. “He told me no decisions would be made without consulting me, and he regularly pops into the office, or phones up to ask: ‘How can I help you?’ And while he’s admitted that he doesn’t really understand our customer base, he loves product and gets a huge amount of enjoyment from sourcing,” she said in a telephone interview.
While Green said he has tagged “three or four” other U.K. companies as possible acquisitions targets, he said it’s very unlikely that he’d set up shops outside the U.K. “I don’t know the landscape. I don’t know about malls in America. From what I’ve seen, they’re dead, like cemeteries,” he said with a laugh.
“Seriously, I think results can be very mixed when you start crossing borders. If someone comes to me and tells me they want to invest their money in bringing one of my stores to the U.S., then that’s different. I just won’t be an absent landlord.
“But moving is tricky business. What can I offer that the local market doesn’t have? What’s my point of difference? In the end, I’m not into building big tombstones,” he said.
Asked which mass fashion companies pique his interest, Green answered the ones that are badly run. He said Gap was an accident waiting to happen. “How many can you have on every corner? And when denim is not a fashion item it’s okay to be Gap because there is no competition. But what about when it is? Then everyone is competing with you.”
On the flip side, there’s Zara. “It’s a great model, but one that you have to set up right out of the box, from day one.”
As for the future, Green said he’s not planning on stalking M&S again — at least not this week. Safeway is a different story. Earlier this year, Green told WWD he was interested in the supermarket chain because of its potential for selling nonfood items, in addition to its standard offer. He is thought to have tabled a $4.8 billion cash bid. Whatever the result, there is no doubt that it’s the process of buying, selling and profit-making that makes Green spring out of bed in the morning.
“The nice thing about what I do is that I never know what I’m going to do next. I wake up in the morning and there’s a whole new set of possibilities.”