Last year Beaverbrooks racked up record sales and profits thanks to a successful celebration of its 100th anniversary. The bunting and balloons had barely been taken down when Covid-19 laid waste to the company’s retail network for three months, and even its ecommerce operation was forced to close for a fortnight. Sales were zero, the chairman Mark Adlestone OBE and managing director Anna Blackburn, tell WatchPro’s Rob Corder. But that was when the legendary team spirit at Beaverbrooks kicked in, and the bounce back has been remarkable.
WatchPro: We cannot avoid talking about the challenging year we are living through, but I thought it would be interesting to frame the elephant in the room by looking back to 2019, which was the centenary year for Beaverbrooks. What were the highlights of that year for you?
Mark Adlestone: It was an amazing year, the best we have ever had on any measurement, be that financial, cultural, product, engagement with our own people and suppliers. It was just amazing.
Our year finished on February 29, 2020, and that was the best year we have ever had in terms of operating profit. But we barely had time to celebrate that result before moving into what I describe as an existential crisis.
It was a year in which we got to see pretty much everybody in the company, certainly those that have been with us for five years or more. We had special celebrations with our top salespeople, we had a brilliant conference. The feeling of togetherness and success was incredible.
Anna Blackburn: The centenary was really the culmination of six strong years. We approached with the view that, if there was anything we had always wanted to try, that was the year to do it. The plan was to use the centenary as a springboard into the next phase for Beaverbrooks. Nobody can live on their history, we have to keep moving forward.
WatchPro: You said that 2019/20 was your most successful ever from an operating profit point of view, and nothing could be more important coming into this year than a strong balance sheet.
Mark Adlestone: We haven’t filed our accounts yet at Companies House, but I am happy to share the figures with you. Our turnover was £143.2 million, up from £128.3 million. Operating profit for last year was £17.2 million, up from £13.1 million. We are thrilled with that.
Anna is right that this was the pinnacle of several years’ improvements. I don’t need to blow her trumpet, but I will. Since Anna has been chief executive and now managing director, because of her focus on accountability, communication and encouragement to try more things, results have been fantastic for six years.
We went into last year knowing that we would celebrate the centenary by looking forwards rather than backwards. The exclusive products that we had across jewellery and watches worked really well. Our Beyond Brilliance 100 facet diamond was fantastic. We had great marketing.
We were blown away. Some of our months were just phenomenal. In May 2019, we had the biggest year-on-year growth of the year, and that was our birthday month. This year, of course, we were closed in May.
I am so glad we did everything we did in our centenary year. We got it in the bank, and that left us in a good position on top of all the other good years.
Going into this [calendar] year, we were thinking before the pandemic that we wanted to continue to grow, but we were very mindful that 2019 was an exceptional year and we felt we had to be mindful about what we could expect in 2020. We were still looking for growth in terms of operating profit and turnover, but we were modest about our expectations. Of course, that is all academic now.
WatchPro: One of the most significant stories from a watch industry point of view last year was the acquisition of a number of Fraser Hart stores that stock Rolex, which we reported in December last year but have not heard a lot about since. Is that deal still going ahead?
Anna Blackburn: When we went into lock down, the deal went on hold. It was a whole new world we were in and we did not know whether we would be closed for a month or many months. The deal has been resurrected and we are working on it, but it is not over the line yet.
Mark Adlestone: We can’t talk about the specifics, but we can talk around it a little. We were later to the party than Watches of Switzerland and the reason for that is that we are not Rolex stockists with the exception of Whittles. But the great thing was that, because of the relationships we have been building with Tudor and Rolex, we were seen as credible partners, which we are thrilled about.
We would not have chosen to talk last year about an ongoing negotiation but, because Watches of Switzerland is a publicly listed company, it had to announce at the end of November that it was acquiring a number of Fraser Hart stores [with Rolex accounts]. That led to the obvious question of what was happening to the other Fraser Hart stores with Rolex, and we had to respond to that. The situation then, and still the situation now, is that there was a firm commitment to do the deal. It will happen, it is just taking time.
WatchPro: Does the situation remain that the Fraser Hart stores mentioned at the time, in Milton Keynes, Croydon and Cardiff were all Rolex accounts and will remain Rolex accounts after you acquire them?
Anna Blackburn: We cannot say much on that sort of detail. What we can say is that the deal now will be for two stores rather than three. We cannot comment on the store we are not taking in Cardiff, because it is not ours. We are moving forward with Croydon and Milton Keynes, and they will remain Rolex stockist when they become Beaverbrooks stores.
WatchPro: The acquisition of Fraser Hart stores and your shareholding in Whittles is so significant because of the transformative effect of Beaverbrooks becoming a Rolex stockist.
Anna Blackburn: It is transformational, but it is also a slow build for us. Our core is still Beaverbrooks and our 70 stores. What I can share with you is that, when we do take over the Fraser Hart stores, we are looking at launching a whole new brand, positioned above Beaverbrooks. What that looks like, we can’t tell you yet because we are still working on it.
I do understand the impact of working with Rolex. However, the proportion of sales to our business will still be very small. It is a new relationship, and we are very keen to make sure we get it right. It is very early days so, while we agree it will be transformational and we expect the stores we take on are going to be massively successful, it is only a part of our business. We will have three Rolex stores [including Whittles], but we must make sure our core Beaverbrooks focus is retained.
Mark Adlestone: We have been thrilled with our relationship with Joanna [Valentine} and Rose [Wilson] at Whittles, going back to 2013. We are also delighted that Rolex has been happy with that relationship. The partnership has been unusual and I do not know who else could have pulled it off because it has needed our empathy and understanding of the history and private nature of Whittles to make it work.
WatchPro: You have painted a picture of the Beaverbrooks success story and strategy coming into this year, and a number of jewellers I have spoken said that January and February were strong as well after the general election cleared away a lot of uncertainty from last year. Then we watched the pandemic creeping across the world towards us and finally hitting in March. What went through your minds when Boris Johnson addressed the nation and told us we had to stay home and lock down?
Mark Adlestone: I did not see it coming but Anna did. I remember getting a phone call from Anna, who had been out and about in stores, and she told me she was making plans to close our stores even before Boris told us to. I could not believe it. I was in complete disbelief.
Anna Blackburn: There had been a mounting feeling within the business in the lead up to the announcement from Boris. We were hearing more about it from people coming into stores and I wanted to see that for myself and find out how our people and customers were feeling.
On the Saturday before, Simon Smith, our retail director, and I went to Manchester city centre and to Trafford Centre because we wanted to see it for ourselves. We could sense the anxiety and could see other stores closing around us, and we just felt that the decision was coming at us, and we should not wait to make it. Our people were becoming scared, we knew a decision was imminent, and we wanted to take it first.
There were also operational things we had to get moving on to close our stores safely and securely so that, by the time Boris made the announcement, we were able to close the doors and leave.
It got worse from there because we realised that our warehouse was not set up for social distancing. So, on the Friday after the stores closed, we took the decision to shut down the ecommerce business, which was even harder.
Our people were massively relieved, but for me it was like a bereavement going home that night knowing that nothing was trading at Beaverbrooks. For a couple of days I felt quite lost.
WatchPro: Turnover dropped to zero?
Anna Blackburn: Zero. Nothing was coming in or going out of the business. We could not operate. But after that initial shock, we had to pull ourselves around and ask ourselves what we would be able to do.
Mark Adlestone: I was personally influenced by one of your stories on WatchPro about Patek Philippe allowing retailers to sell online during the pandemic. We are not Patek dealers, but what it was suggesting to me was that there were people continuing to trade online, albeit the setup of an independent jeweller delivering a single Patek watch to a customer is very different to our high volume operation. Nonetheless, it showed that other organisations were still trading, and that gave us encouragement.
Also, with non-essential retailers being forced to close, we asked ourselves whether we are essential, which we are clearly not. But the more relevant question for us was, are we safe? Accepting we are not essential and focusing instead on ensuring we are safe led us towards the right answers.
Anna Blackburn: By this time, almost all of our 900 employees, except a few key people in payroll and finance, had been furloughed. And after that we very quickly came to the decision that we had to try to get the business running again in some shape or form.
We bought together a group of directors and senior managers to plan how we would reconfigure our ecommerce and warehouse operation to make sure it was safe and effective. Reopening ecommerce worked very well, and started trading very strongly straightaway.
WatchPro: Many of the retailers I have spoken to since the end of lock down have told me about those very early days and how they went through their costs line-by-line to see what could be done to protect cash. At the same time, the Treasury was announcing the furlough scheme and other support measures that were like lifelines to owners.
Anna Blackburn: We feel the support has been very strong. The job retention scheme has been a godsend; the business rate relief offer was also huge. In general, the government response has been more than I would have anticipated at the very start. On the other hand, I do have concerns about what is going to happen at the end of the job retention scheme; more for the wider economy than particularly ourselves. There is going to be an impact on consumer confidence, and that will impact on us.
Mark Adlestone: There is likely to be a raft of redundancies; not at Beaverbrooks, but across the wider economy, but I have to say that the support from the Treasury has been extraordinary. We will pay for it in years to come, but this was about survival and these measures gave us a tangible lifeline when we had zero revenue and bills coming in. One of those bills was our VAT, which was due at the end of March, and the Treasury said we did not have to pay it until next year without incurring interest. That helped us preserve cash.
WatchPro: I wonder how different things might have been without the job retention scheme. With 900 people effectively being sent home with no work for months, it would have been incredibly difficult to know how many you could keep on the payroll.
Mark Adlestone: We have invested so much time in our people, so it would have been a disaster for them and for us if we had to make redundancies. Thankfully, we did not have to make that decision.
WatchPro: Were landlords as helpful as the Chancellor?
Anna Blackburn: There have been calls for help with rents while shops have been closed, and that took weeks of conversations to work through. The first question we asked was should we be paying rent when we are closed? Contractually we should, of course, but morally is it right to be forced to pay with everything closed for months and so many unknowns.
Mark Adlestone: Our view, and importantly we were communicating with all our landlords, we made the case that in the spirit of partnership, we have all lost out on a quarter’s business and we asked to share the pain 50/50. Anna got creative coming up with different ideas and generally just talking. Effectively, we have looked through our entire retail portfolio and, apart from the stores were we own the freeholds, we have been renegotiating with landlords.
Anna Blackburn: There have been very few landlords that have not engaged, and we have had to come up with a range of different deals with different landlords and they are now pretty much all agreed.
WatchPro: Shopping centres look likely to be hardest hit, and we have already seen Intu go into administration.
Mark Adlestone: We have 13 shops with Intu so we might have expected that to be a disaster, but in fact the people we deal with are still the same, even though the business is in administration. I expect the group will get broken up.
Anna Blackburn: We had a number of customers ask us whether Trafford Centre was going to close, but that is in nobody’s interest and is not going to happen.
WatchPro: We spoke about going into this crisis on the back of many years of strong turnover and profits, the other strength you have is your corporate culture. How did that help you get through the toughest times?
Anna Blackburn: We were very clear that we wanted communication to be strong all the way through. We made videos from home that we distributed through Yammer [an internal social media platform]. Normally Yammer is about business, charity and customers but we opened it up so that people could talk about whatever they were doing during lock down. We encouraged people to get out and get active. We had our highest ever take up of virtual events like fun runs and bike rides. We had 300 people taking part in those. We had a lot of charity fundraising. We also updated people on the business decisions we were making like closing and reopening ecommerce.
We had great feedback from people saying they still felt part of the company, even though they were not working. They felt supported by their colleagues and the company and that has helped us come back strongly.
Mark Adlestone: We have heard from many of our people that now they want to pay us back after we maintained their full salaries throughout April and May.
Anna Blackburn: By paying their full salaries for those two months, it gave everybody confidence that they were going to be OK and be able to pay their bills.
All the while people were on furlough, we had a core team working on preparations for reopening and making sure that our teams could come back feeling safe and confident to give their best to our customers.
Mark Adlestone: The other thing we did to build confidence is that we made a video showing what our stores would look like when they reopened. They could do a virtual walk round of the safety measure we were putting in place with social distancing, masks, one way systems and screens. We know what we are doing is way above what other stores are doing.
In the office, even though we still have around half the team working from home at any one time, we know that people want to be in and working with their colleagues. We have not found any reluctance to come into work. And we need our people back together. We know we can operate as we are, but to get the creative spark going, we need to be in.
Anna Blackburn: We have also been using technology very effectively. Like many businesses we have been communicating using [Microsoft] Teams and other tools that we have not really utilised before. That has been very effective and I am sure it will change some of the ways we do business moving forwards.
WatchPro: You online store was closed at a time when ecommerce sales were rocketing in the UK. What was your experience when it reopened?
Anna Blackburn: It was closed for 19 days. We restarted with some limitations to start with, such as restricting some of the high volume, lower priced products because we wanted to build back slowly. It has built significantly from there.
Mark Adlestone: We have been surprised that we have not seen a drop off in online activity. Now with shops open, and offering click and collect as an option, that has helped us grow the online business even more.
WatchPro: What was your online business worth as a percentage of turnover?
Anna Blackburn: I wouldn’t like to put a figure on that, but I will say that sales were up across the board last year including online and in store. Our in store sales were actually up 8% last year, which goes against the trend of the wider retail market.
WatchPro: Has your retail portfolio been stable or have you been looking to reduce the number physical stores?
Mark Adlestone: Last year we closed four stores and opened three.
WatchPro: That is significant, because if your business was suffering as much as other major retailers, you would expect to see about 30% of your stores needing to close.
Mark Adlestone: Over the past 10 years, when our leases come to the end, we have very often renegotiated shorter term leases with more flexibility to get out at the end, if we need to. All of our stores were profitable last year, so we are not looking to close any of them.
WatchPro: How has trading been since you reopened. You shared news early on that your sales on day one were a record high, but I assume that was an initial rush of excitement.
Anna Blackburn: That first day was obviously a bit of pent up demand, but we are trading up since reopening. Stores are down, online is up, and the net effect is that we are up overall year on year. We can’t get our heads around that. Stores are down, but significantly less than we anticipated.
We continued with our marketing through the lock down. We had a TV campaign which was repurposed from our advertising during our 100th anniversary called Share the Love, which also went across social media. It wasn’t particularly commercial, it was all about brand awareness that kept us on the radar. We bought our PR manager back early from furlough, and that got us some great coverage.
WatchPro: In most crises, the significant market share changes tend to happen at the point when the recovery starts, so priming the business ready for that is likely to have paid dividends.
Anna Blackburn: We have had conversations right from the beginning of this that Covid will cause the strong to get stronger and the weak to disappear. That is inevitably what will happen. It was either brave or stupid [to keep the marketing going]. It felt like the right thing to do and it seems to be paying off.
WatchPro: How do you feel the rest of this year, and particularly the crucial run up to Christmas will look?
Mark Adlestone: We are very happy with our performance right now, but it is impossible to predict the future when we don’t know whether there will more of these local lock downs or even a national lock down. We don’t know whether people will keep spending with so many inevitable redundancies.
Anna Blackburn: There are some people that have a little bit extra to spend right now. Holidays have been cancelled, they have had refunds and they have been spending less while they have been in lock down.
Mark Adlestone: Footfall is massively down, but that is not reflected in the business we are doing in our shops. Our conversion rates have improved.
Anna Blackburn: We anticipated that. We thought that people coming out to shop would be doing so with a purpose, and that is proving the case so far.
Mark Adlestone: We know there are still a lot of people out there that do not want to come out to shops. To generalise, we would say that the big city centres and shopping centres are finding it harder than the more localised areas.
WatchPro: Places that are dependent on foreign visitors like central London, Edinburgh, York or Windsor are hardest hit it seems. Has your focus on areas where almost all the business is domestic shielded you?
Anna Blackburn: We didn’t get the uplift that so many got after Brexit when the pound was weak and tourists were flooding into London to buy luxury goods, but we don’t get the downside London is facing now and we don’t have to deal with those extremes.
WP: I wonder whether the profile of your typical customer might benefit you as well. Correct me if I’m wrong, but I would imagine they would be the sort of people that enjoy restaurants and might have had a couple of foreign holidays by this stage of any normal year. They have been robbed of those pleasures, so perhaps they might all have a little extra cash and want to treat themselves.
Anna Blackburn: We hope that they continue to treat themselves. If things continue as they are, then I think that Christmas will be quite strong. History shows us that people want to treat themselves around Christmas, even after the toughest years. But so much could change between now and then that it is impossible to predict.
Mark Adlestone: One thing we can comment on right now is that we have seen very little impact from being told that face masks are mandatory in stores. That came in last week and our sales have continued to be strong over the five days since.
Anna Blackburn: There is a security question with everybody wearing face masks, but we politely ask everybody to quickly lower their masks so they can be seen by our cameras. We have had no problems with that at all once we explain it and make a bit of a joke about it.
WatchPro: What would a good result at the end of this financial year look like?
Anna Blackburn: As I said, if we carry on as we are, which is performing better than we expected, then Christmas will be strong. We have given ourselves the best chance to do that.
I think we will make a profit this year, although it will not be anything like as good as last year. Without the help from the government, it might have been a different story, but that has helped us to protect jobs and that will mean we go into next year hoping to return to the levels of 2019.