Lucy Bailey interview: When sticking to the knitting works

Published on Tuesday 27 January 2009 20:31

WHILE most companies are battling to survive the downturn, a few entrepreneurs are turning the slump to their advantage.

International banker turned knitting guru Lucy Bailey is one of those entrepreneurs.

Bailey has found a growing market of cash-strapped consumers for whom staying in is the new going out and who are looking for homespun hobbies – and know that a good sweater can help keep heating bills down.

Result? Bailey's haberdashery chain, McAree Brothers, is going from strength to strength.

Knitting sales alone are up by a quarter this year, while total sales in the 12 months to 25 January have risen by 12 per cent to 959,924.

After enjoying a successful banking career at ANZ Grindlays in London – first in international banking and later working with private clients – Bailey returned to Scotland in the early 1990s.

Initially working as the director of a mathematical research institute in Edinburgh, she took over the family business, McAree Brothers, from her mother in 1996.

At that point, the historic Stirling department store, founded by Bailey's great grandfather John McAree in 1878, sold everything from womenswear to school uniforms.

With her banking business brain firmly in place, Bailey knew things had to change.

"It was a fantastic opportunity for us," she recalls. "I realised that we just couldn't compete with the big players in those kinds of markets and that we had to specialise.

"It was about that time that knitting was starting to become trendy again."

But having shunned needlework at school in favour of biology, chemistry and physics, Bailey had to get herself swiftly up to speed on her new industry. She is now a serious convert.

"Do you knit?" is the first question she fires at me as I walk through the door of her Edinburgh store. I sheepishly admit that, no, I couldn't create a woolly scarf if my life depended on it.

"One of the reasons that knitting has become so popular is that it is a lot easier thanks to new technology in wool," she explains. "The patterns very much follow catwalk fashion and things like big knit jumpers, using large needles and thick yarn, are very easy to do."

The company's 20 staff – many of them part-time – are all knitting experts. Some are textiles students, some fashion designers, while others are just enthusiasts.

Inheriting the business with two existing branches – one in Stirling, which still has a department selling school uniforms, and the other in Falkirk – Bailey, who had made her home in the capital, decided to expand, poaching a manager and one member of sales staff from Jenners' haberdashery department.

"We opened the Edinburgh store about two years ago now, while we have recently massively invested in our online shop," she says.

Now the online shop, McA direct, accounts for about a third of all sales and Bailey is contemplating opening a warehouse from which to ship online orders to its customers across the world.

She also wants to take advantage of the credit crunch to snap up a cheap deal on a Glasgow branch.

"I think one thing we can cash in on is the falling value of commercial property," she says. "I think we definitely have potential for a successful shop in Glasgow."

In recent months, customers have been flocking through the doors of all three of her shops.

"I feel a bit embarrassed, saying I'm doing well when so many other people are struggling," Bailey admits. "We're finding that people are telling us that they need something to do while they're staying in in the evenings – so they decide to learn to knit. We are also finding that sales in yarns such as cashmere are growing because people want warm knitwear so that they can turn their heating down."

But although sales are up, the firm is not completely immune to the credit crunch.

Import prices for McAree Brothers' popular European wools are set to soar as the pound plummets – although Bailey has hedged her buying as far ahead as possible and plans to reassess her stock, potentially to focus on more homegrown products such as a popular range spun on Harris.

And Bailey is also expecting a rise in staffing costs from the increase in National Insurance contributions.

School uniform sales from the firm's Stirling shop are slightly down – a result, Bailey believes, of people buying fewer sets of uniforms and washing them more often.

However, even with these obstacles, and the online investment, the firm is still expecting growth in profit this year.

And Bailey hasn't let lessons from her banking days slip away.

"I am very hot on cash flow," she laughs.

TIMELINE

1878 McAree Brothers opens in Stirling as a department store

1988 Second department store opens in Falkirk

1996 Chain specialises – narrowing its offer to knitting and haberdashery products

2007 McAree Brothers opens third branch in Edinburgh

Needled by downturn?

Lucy Bailey's tips on surviving the recession:

&#149 Review your costs

Do a thorough review of all your costs once a year. Key costs such as stationery, printing, gas, electricity and insurance can vary enormously between suppliers.

&#149 Negotiate

Don't accept the rates your bank quotes you. Even in the current credit crunch, credit card charges and overdraft rates are always negotiable. If you are renting your property try negotiating with the landlord.

They may allow you to pay rent monthly instead of quarterly, which would help with cashflow.

&#149 Look for opportunities

When the economy is bad it opens up opportunities. Competitors close, leaving gaps in the market. Property becomes cheaper to buy and rent.