Brown Thomas and Arnotts invest €25m in online as sales rise
Arnotts boss to take over both department stores as turnover hits €250m
BROWN Thomas and Arnotts, the two landmark Dublin department stores, are to spend €25m on technology in order to capitalise on rapidly increasing demand for online retail. Online is on track to account for around 25pc of sales across the stores within three years, based on current growth levels.
It comes as new accounts for both show turnover totalling €249m for 12 months to February 2018, with Arnotts beginning to reap the rewards of increased investment from new owner, the Selfridges Group, which also owns the Brown Thomas group.
In an exclusive interview with the Sunday Independent, Brown Thomas managing director Stephen Sealey and Arnotts managing director Donald McDonald said that preparation has been going on behind the scenes to allow the two stores to work more closely together, sharing HR, IT and other back office functions.
It was announced to staff last Friday that Sealey is to retire next May, with McDonald taking over the role of managing director of both stores.
Accounts to be filed shortly for Arnotts show turnover was up 11pc from €75.4m in 2017 to €83.6m. The company, which had been heavily indebted prior to its takeover by Selfridges in 2015, delivered an operating profit of €272,000, a turnaround from an operating loss of €523,000 in 2017. “We are actually ahead of where we thought we would be when we started,” said McDonald.
Accounts to be filed shortly for Brown Thomas show that turnover was €165.7m, down 1.2pc.
However, Sealey said that like-for-like sales were up 4pc — Brown Thomas reports a net income figure for concessions, which does not reflect the revenue figures recorded by these labels at the tills.
Topline sales for the Brown Thomas group are €300m and were in growth last year, he said. Pre-tax profit was €4.7m, down from €6.2m and Sealey said this was because of investment in the business. It has recently completed a €35m investment plan.
Speaking about the changing of the guard at the stores, Selfridges Group MD Paul Kelly paid tribute to Sealey’s achievements over 10 years as MD. “His passion and energy contributed hugely to ensuring that Brown Thomas is well positioned for its continued success into the future,” he said.
“Donald has been doing a great job in restoring Arnotts’ iconic retail status and I have every confidence that he will continue to nurture and grow both Brown Thomas and Arnotts into the future.”
BROWN Thomas and Arnotts, both owned by the Weston family’s Selfridges Group, have invested tens of millions of euro in their stores over the past few years. In a highly competitive retail market, where online rivals and cheap, fast fashion are piling on the pressure, these landmark Dublin department stores have been focused on making their shops a “destination” — offering new cutting-edge labels, on-trend restaurants and ‘experiences’ such as beauty treatments and even upmarket piercing services.
Next on the agenda is a digital overhaul to complement the upgraded stores. “Between now and 2022 we will be investing €25m in our digital platforms, across both businesses,” said Brown Thomas managing director Stephen Sealey.
It is a very appealing and lucrative area for retailers which get it right.
“Online has grown every year for Brown Thomas. To say double-digit growth underestimates it — substantial double-digit growth.”
While digital sales are growing in importance, Sealey and Donald McDonald, managing director of Arnotts, were at pains to point out that bricksand-mortar stores are at the centre of the business.
“I don’t want to give the impression that we see all our business going online. This digital investment is about experience in stores as well,” added Sealey. For example, a Brown Thomas innovation called ‘endless aisle’ will make it easier for regional stores to order products only stocked in Dublin.
But adapting to a fast-changing environment is key to success and so capturing the online opportunity is an imperative. “A very good online enhances your physical retail,” said McDonald. Both shops are about to file accounts for the year up to February 2018. Sealey said Brown Thomas’s online sales were strong, while the Dublin shops have been performing well. The key drivers of growth are luxury accessories and menswear.
The group’s top Irish customers continue to buy luxury items, but the very high spending levels seen at the height of the boom have not returned.
“Our average transaction value is up but it is not shooting up. I don’t think we’ve ever got back to those days of 2006 and I’d ever want to,” said Sealey. “I can still remember people almost coming to blows over the last Chloe handbag. I think now it’s a more considered purchase.”
McDonald said that the Arnotts store, which has a different product offering and positioning to Brown Thomas, has almost finished its in-store upgrade. An 11pc increase in sales recorded in the year to February 2018 was down in part to the investment. “We’re starting to see some return on that. We have introduced new brands like Mac and Charlotte Tilbury in beauty, Jo Malone, and all of those made a significant contribution.” He said Arnotts would continue to have a very different offering from Brown Thomas.
“Our brand makes us very aspirational and we are always looking for new brands, but our intention is to stay very true to what the Arnotts brand is and be consistent with its customers.”
The business has turned around financially, delivering an operating profit of €272,000, compared with a loss of €523,000 in 2017. However, McDonald will now be focused on growing margins. “It’s a journey and we’ve made a significant move this year. The big call out is that we are in operating profit, compared to where we were. And with out continued investment in the store we would like to see that grow and grow.”
He said that despite the impact of the storms, the business was doing well this financial year, and was up on the previous 12 months.
“It may not be the dizzy heights of the 11pc we had last year, but we will see growth and will continue to evolve and move with the customer.”
He also said the home department — a big focus for Arnotts — has huge potential. Both shops are now preparing on the key shopping season of Christmas. Staff were told on Friday that Sealey will retire from Brown Thomas next May, although he will continue to be involved in the group, and McDonald will become managing director of both Arnotts and the Brown Thomas Group.
Sealey, who has been with Brown Thomas for 20 years, said he and McDonald had worked closely together on the Arnotts project. “We have accomplished most of the heavy lifting,” he said, “so the timing seems right to me.”
He will work with the business in an advisory capacity through all of 2019. McDonald said he was looking forward to the new role: “The excitement is about building on the achievements Stephen has made here at Brown Thomas and continuing on the good work at Arnotts. And we are very committed to the two separate propositions of Arnotts and Brown Thomas.”
Paul Kelly, managing director of Selfridges Group, thanked Sealey for his work as over the past 10 years as Brown Thomas managing director. “His passion and energy contributed hugely to ensuring that Brown Thomas is well positioned for its continued success into the future.” Kelly said the results for Brown Thomas and Arnotts showed they had delivered an “excellent performance”.
“We have continued our ambitious programme of capital expenditure across all channels and stores,” he added.