Anna Blackburn worked her way up from shop floor trainee in 1997 to become chief executive of Beaverbrooks four years ago. This year, she has earned a seat on the board, only the second person from outside the founding families to have done so. It is a massive vote of confidence from chairman Mark Adlestone, and a statement about the importance of the two leaders working together for the next decade and beyond to maintain the values of Beaverbrooks at the same time as shooting for ambitious commercial growth, they tell WatchPro’s Rob Corder.
WatchPro: It has been a year since we last sat down for a big interview. What have been the key highlights and developments since then?
Mark Adlestone: We have some wonderful news, which is Anna Blackburn has now become a director of Beaverbrooks, and will take the title of managing director. This is a really big deal for me, the company and for Anna because she is only the second non-family member to become a director. And she is certainly the first non-family member to become managing director; the only other non-family member of the board was financial director.
It reflects the amazing four years that Anna has had as chief executive, the success we have had over that time in terms of profitability, the strength and stability that we now see in the company, and also from my point of view it is really important because I need a partner to work with.
WatchPro: Most business owners when constituting a board of directors will want different skills and experiences around the table. Some will look to cover off certain weaknesses. Is that what you are doing here?
MA: I think it is a truism that most good leaders will surround themselves with people who are better than themselves. The one thing that Anna has that I do not have and never could have is an oversight into the business because she started as a graduate trainee in 1998. I am a family member, born with a silver spoon. As much as I have worked to get close to our people, it is just a different relationship. Bringing together an insider and an outsider is working really well.
WatchPro: Is there any sort of yin and yang in terms of personality types between you?
Anna Blackburn: I would say Mark is the calmer of the two of us. I am high energy while Mark is a little bit more level, but we do chop and change. We know each other very well and where we want to get to. We enhance each other.
MA: Our people do feel part of the family. It sounds like a cliché but is actually true. This is part of why it was ultimately an easy decision to bring Anna onto the board.
There was the serious option of going outside the company to look for an external CEO. That person would have brought in skills. Culturally, I am not saying it could not have worked, but this for me is a much better solution.
WatchPro: Over the past four years Anna, while you have been chief executive, how have you resolved disagreements between the two of you?
AB: The biggest disagreement we had was when I first became chief executive and we went through a consultation on salaries. We had moved to a system where we got rid of all sales bonuses and took people to a higher rate of pay without bonuses with a view to them delivering better results on a more consistent basis. In effect, adding the bonus to the salary, regardless of performance, which did not work.
We were at a point where our profitability was much, much lower. We were getting nowhere near the turnover we expected to justify those salaries. Almost as soon as I was appointed as chief executive I said we have made a mistake. We need to communicate to our people that we have made a mistake and find a way to rectify it that would entail reducing salaries and reintroducing bonuses.
MA: This is a good example of the difference between consultation and consensus. Everybody was saying no, I was initially saying no, the executive team was saying no. They weren’t saying no for themselves, but for their colleagues because they felt it was unfair.
AB: As we went through the process, Simon Smith [head of retail] and I learned that there were a number of managers that had gone to Mark to say that they were not happy and did not want it to happen. That was having an impact on sales.
Simon and I decided we would get the people with the strongest views together and have the conversation with them. When we presented the facts to them of where we were as a company and where we should have been, how we were going to plug the deficit, how we were going to grow the company in the future … we debated, we talked about what we need to achieve, and by the end of those meetings the managers agreed that it was not fair that all sales people earned the same; it was not fair that that people who were not performing got the same as people that were over-performing. They ultimately agreed that the only way we could rectify that problem was for people to take pay cuts and re-introduce bonuses.
WatchPro: I can image the argument your managers would have made was that the mistake was made by the company, and it is the company that will have to find a way to correct it over a few years.
MA: That’s right, but Anna made the right decision rather than the easy decision. This is the sort of thing that has given me confidence in Anna over the four years she has been chief executive: seeing how she has performed, seeing how people in the business respect and love her.
WatchPro: When we last spoke, you were reporting sales over the previous two years — 2015 and 2016 — of just under £120 million. Profit in 2016 was down. How has trading been since then in 2017?
MA: Turnover for the financial year that ends in February 2018 is looking to be in excess of £126 million with operating profit of over £13 million.
We opened two shops last year in Bracknell and Guildford. We have no plans to open any shops this year, but we have plans beyond that. We have not closed any shops. It is possible that the odd one or two will close in the future as we come to the end of leases.
In terms of growth, we are ambitious, but not ‘Aurum ambitious’. What really motivates me is that we have this wonderful business and wonderful culture that generates great profits. As much as it is possible, I want to protect that, grow it for the future, and create a legacy. Anna joins me as MD because she shares that passion.
Where this business going to be in 10 years time is what matters to me. We are not looking to sell this company, and that is a fundamental difference to other businesses. I want to protect it and grow it for the family and fundamentally for the employees. That is a shared vision that Anna and I have and why it would have been wrong to have brought in a chief executive from outside the business.
AB: The thought of an outside CEO scared the living daylights out of me. At that point I had been with the company for 15 years and I knew that it would be incredibly difficult for an outside CEO to get that value alignment.
MA: Even if I had found a chief executive that shared our values, and that is a big if, everybody knows that chief executives are typically in post for relatively short periods of around five years. I was chatting to the chairman of eBay this summer. He said to me that ideally a chief executive should not be in a place for more than six or seven years because what tends to happen is that they are really driving and pushing for the first three or four years, and after that they are not as ambitious. Companies then need to bring in a new chief executive to start pushing again.
Had I bought in a chief executive at the time I promoted Anna to the role, that person might well be leaving us about now. So I am really looking long term.
WatchPro: Tell me about your annual conference. What are the headlines issues you will be talking about this year with your team?
AB: As well as talking through our performance and business objectives, the theme is always about enriching lives. Last year it was around charity, and we will continue to do that. This year we want to talk about personal wellbeing. We want to make sure that they have the right balance.
MA: We pay a lot of attention to the Best Companies to Work For surveys, and one of the areas we need to improve on is in wellbeing. This does not just come down to me as a paternalist telling people how to improve their general wellbeing, Anna encourages people to think about how they can improve themselves and we can then facilitate that. Individuals have to take ownership and responsibility for their own wellbeing.
AB: Culturally, one of the best things we have done as a company was to build on Mark’s paternalistic outlook, which made us a great employer because we would give and give and give. What we then recognised was that our role is not to just be a great employer, but also to create a great workplace. We have 71 stores, and we need to make sure that each one of those stores as well as our head office are great places to work that improve people’s wellbeing.
The retail environment can be seven days a week, 15 hours a day. That is not an easy place to take care of yourself, so we need to redefine what wellbeing means within Beaverbrooks.
MA: It is too easy for people to just grab a McDonalds or a Kentucky.
AB: Wellbeing is about physical, mental and emotional health, and we want to do something at conference that helps our managers to be strong for their teams, but not to become so maternalistic or paternalistic that their teams become reliant on them to solve all their problems.
Individual resilience is something we talk about. Wellbeing is a shared responsibility. We can do so much but there has to be a balance.
WatchPro: You mention eating fast food in the context of improving the workplace. If that came across to your staff as you caring about their waistlines or judging them on their waistlines, are you comfortable with that?
AB: There is a difference between caring and judging.
WatchPro: Absolutely, but how do you ensure it comes across to your teams the right way?
AB: We have the right culture. People know in essence that we genuinely care about our people. It isn’t about flagging somebody as obese and asking them what they are doing about it. It is about educating people.
The gym I go to has two posters on the wall that I like. One says that you can’t out-exercise a bad diet. The other one is that your workout is only 4% of your day, so there is no excuse not to find that time to exercise. We need to help educate people about that sort of thing.
WatchPro: The UK watch market has been operating at two different speeds. There has been a slow lane with struggling sales of less expensive watches, particularly on the high street, and a fast lane of soaring luxury watch sales, especially in London. Where do you see Beaverbrooks now, and where would you like to go in the future?
MA: Where we are strong, albeit without Rolex or Patek Philippe, is with Swiss watches. We do well with that. We are also strong with diamonds and our own jewellery has been performing well.
AB: We have started to see some signs of fashion watches coming back — nowhere to the extent that it was — but certainly some of the newer fashion brands are doing better. Olivia Burton, Armani, Vivianne Westwood, Hugo Boss are all doing well. Even Michael Kors has now found its level and is still a good earner.
WatchPro: How much has that business moved online? Are rising online sales compensating for continuing falls in your physical stores?
AB: No, it has levelled off across the board. It was dropping off a cliff for quite a while and now it has found a nice level. We have pulled back from a number of fashion brands, and have kept the strongest performers. We don’t want to collect brands, they have to provide a return on investment.
WatchPro: Securing agencies for the best-selling Swiss watches is not just a national battle between multiples, it is a city-by-city fight for every shop to secure the most desirable brands.
MA: Very much so, and that will inform our strategy going forward.
WatchPro: How do you approach that. If I am the general manager for the Beaverbrooks store in Canterbury and I am desperate to sell Omega, is there anything I can do?
MA: There is nothing they can do. They would all love to have Omega and Breitling; in some cases they would love to have TAG because we do not have TAG in every store. But, interestingly, we still have good businesses where we don’t have those brands. We would always prefer to have them, but we can do good business without them.
WatchPro: Perhaps I attach too much importance to securing the biggest Swiss brands. There have always been thousands of successful jewellers up and down the country that do not have Rolex. Operating profit for Beaverbrooks is three times higher than Fraser Hart, which does have Rolex. Ernest Jones stores look fantastic without Rolex.
MA: I agree, Ernest Jones has done an excellent job since they lost Rolex.
WatchPro: Cartier looks excellent in some Ernest Jones stores. Is that a brand that you would consider?
MA: It has very limited distribution and is a super brand.
WatchPro: I would love to see Cartier with wider distribution. It is the perfect brand for a shop-in-shop or franchised monobrand boutique because it has jewellery as well as watches.
MA: You are spot on.
WatchPro: Do you workshop scenarios over a ten year plan where you might work with a brand like Cartier? Do you assume that you will not get Rolex and come up with alternative growth scenarios?
MA: We might not get Rolex in Beaverbrooks, but who knows where our Whittles-type business will go [Whittles, a Rolex agent in Preston, is 49% owned by Beaverbrooks].
AB: We need to put our best foot forward with Whittles as it is, and then look at how we might expand that in the future. We are in this for the long haul, so it is not about short term gain.
MA: We are happy with the business as it is now, but we also understand that a business must not stand still and must move forward. We are acutely aware of that.
WatchPro: What sort of challenges does a business face when growth stalls and profits dip, as they did in 2016-17 for Beaverbrooks, in terms of morale, recruitment, momentum, coming up with new ideas?
AB: If you look back to how the business was performing when I took over as CEO and imagined that it might generate profit of £50 million over the next four years, anybody would have snapped their hand off for that. What I wanted to do when I took over was deliver a consistent level of much higher profit and I think we have done that.
Next year, the 100th anniversary is a springboard to take us to the next level, and we will be looking to do more.
MA: One of the things I would like to draw attention to is the share buybacks we have been managing over recent years. All of that has been done within cashflow of the business, we have not borrowed. I quite like that as a concept. We have no debt, and I would like to keep it that way.
WatchPro: You have been doing around £12 million per year in operating profits in recent years. How much of that drops through to the bottom line in retained profits that can be invested in the future growth of the business?
MA: After operating profit you have distribution to directors, dividends, profit share to senior managers and managers, charitable contributions and tax. You are probably talking about around £4 million of retained profit after that.
WatchPro: That sort of money, particularly accumulating over four years, gives you a healthy war chest as you prepare for your 100th anniversary year in 2019.
MA: Yes, but don’t forget there is still the process of clearing up the shareholding, we are pretty close now but it is still ongoing.
AB: We have a very unique and special story, and we need to be clear on how that translates for our customers, and how we use it to grow our competitive advantages.
WatchPro: I would have thought it is easier to tell a unique Beaverbrooks story through jewellery than it is through Swiss watches.
MA: That is a big strength of ours and gives us our own identity. It is also a great profit centre for us. However, we do need the Swiss watches to complete the story. We believe that the quality of our jewellery matches the Swiss watches that we sell, which is not necessarily always the case with others.
WatchPro: The jewellery market has also been performing in starkly different ways this decade, with Pandora franchisees growing far faster than any other businesses. Why did you choose not to get involved with that?
MA: It wasn’t a choice. We misjudged it; we did not push hard enough; and they did not want us because we were a big bad multiple. It is a fascinating story, probably the story of the past decade, and we have not been part of it. So you have Pandora, Rolex and Patek, and we have not been part of any of them. And, you know what? We have still been going OK.
WatchPro: Being a traditional family jeweller, as you describe Beaverbrooks, has been extremely difficult over the past decade, starting with the financial crash and the spike in the gold price to almost $2000, and the way that opened the door to the silver brands.
MA: It has been tough, but where we have continued to do well is in bridal, throughout all that, and we have adapted our jewellery.
AB: At the lower end our silver has done very well. There is a balance about knowing your customer and knowing your market. If you look at Mappin & Webb, because they have Rolex, because they have the higher end brands, some of their jewellery will be a step above. For us, we have worked with brands, and pulled back from them when they have not performed. We have improved our own jewellery. It is all about agility at that end of the jewellery market.
MA: We recognise that, in order to protect the Beaverbrooks brand, it is really important with the Swiss watches and with our own jewellery that we do not over-index in Swiss to the detriment of our own business.
AB: Quality across the portfolio is vitally important. Even at the fashion end of the watch market, we stock high quality brands that appeal to our customers. Jewellery is the same, whether we are talking about bridal or silver and CZ, it has to be quality.
WatchPro: What do you focus on to pull people into your shops? Is it bridal, Swiss watches?
MA: First is location. We have to be in the heart of things. Then it is the brand name of Beaverbrooks. It is the layout of the store.
AB: The brands position your stores in the consumers’ eyes. So if you have got Rolex, it positions you as a certain type of jeweller. If you have TAG Heuer, it appeals to a wider market and people immediately know they are looking at a quality establishment.
WatchPro: Speaking of location, we spoke a year ago about under-indexing in the red hot central London market.
MA: Yes, and since then you have told us about retail developments at Kings Cross and Battersea, and we are looking at those. Where we are even more focused is the Brent Cross regeneration and extension in 2022; plus Westfield Croydon of course. They are the big ones. We are not sure about Battersea and Kings Cross; we are not saying no, we are just not sure.
We are not overly fixated on this central London thing. We are a national company that appeals to the aspirational and affordable luxury customer. Our core market is never going to be in central London.
WatchPro: Would you say Beaverbrooks is more focused on domestic customers than some of your competitors?
AB: The tourist market has never been that big for us.
WatchPro: Which might explain your stability over recent years?
MA: We do well in the provinces. We are Mr and Mrs Middle England.
WatchPro: You mentioned before we started recording that you are opening an Omega monobrand store. Can you tell me about that?
AB: We opened in Westfield Stratford [East London] in December 2016 and we are now going to be taking a unit next door to that store, which is currently Neal’s Yard.
We will be reconfiguring the whole space to give us an Omega boutique. There is a lot of work to do. First we will move Beaverbrooks next door into the new unit, then we will reconfigure the original space, move back into it and then turn the Neal’s Yard space into an Omega boutique. We will even be nicking a bit of the original space to make the Omega boutique bigger and adding a mezzanine floor.
It will be a real destination and we are very excited about it.