Profits add polish to Schuh

IT’S become a must-stop shop for celebrities such as Oasis songsmith Noel Gallagher, Leeds striker Robbie Fowler and Page-3 model Jordan when they go hunting for the latest fashion footwear.

But it was only ever intended to be a "wee shop" that Sandy Alexander could earn a living from.

However, in its 21st year, the Edinburgh-born footwear retailer Schuh saw profits and turnover hit record levels. Pre-tax profits have rocketed 250 per cent to 4.1 million on turnover up 36 per cent at 51.8m.

Mr Alexander has long accepted that the "wee shop" concept has bit the dust and he is now looking forward to taking Britain’s biggest seller of branded footwear to even greater heights.

Over the next 12 to 18 months, Schuh will spend 1.5m on new outlets and boosting its 36,000sq ft Livingston headquarters and distribution hub up to 56,000sq ft.

Its long-awaited online shop goes live in the next few weeks and in November its first franchised outlet will open in Dubai in the United Arab Emirates.

The hunt for new stores, particularly in London, will continue, and the company, which sells more than 70 brands of footwear, will also look to beef up its own Schuh label.

Schuh has been profitable every year since launch from a single outlet in Edinburgh’s North Bridge Arcade in 1981. But it’s only in the last couple of years that "all the building blocks" have conspired to lift the company to its current level.

And despite signs that consumer spending is slowing, Mr Alexander, the company’s managing director, believes Schuh can hit sales of 60m in the current year. "It’s going to be a tough year, but there’s plenty of opportunities for us," he says.

Mr Alexander may have sown the seeds for Schuh - which takes its name from the German word for shoe, schuhe - but he says: "I’ve never really seen it as my business. It’s a company everyone can play a role in if they can add value to the business."

The years between launch and the late 1980s were "Schuh - Part One, the learning curve", says Mr Alexander.

The real Schuh story starts with the arrival of current chairman Terry Racionzer in 1990, explains Mr Alexander.

Schuh had enjoyed a trading agreement with department store chain Goldberg, but the collapse of the chain in the late 1980s left Schuh in limbo.

"We could have gone out of business," explains Mr Alexander. "But we got a chance to restructure, refinance, refocus and relaunch the business."

Having previously met Mr Racionzer, then a freelance business consultant, Mr Alexander saw him as a "big thinker" and someone who could help Schuh move forward. "That’s when the wee retailer met the big thinker," says Mr Alexander. "It’s where the real Schuh story begins.

"Terry had a great set of complementary business skills and he came in, wrote the business plan, led a management buyout and helped relaunch the company."

Mr Alexander confesses that prior to Mr Racionzer’s arrival "the business was a bit haphazard". He adds: "I never looked to create a network of shops, I just wanted a wee shop and to see how much we’d taken at the end of the week."

Today, Schuh has 31 shops in the UK and Ireland, more than 50 "concessions" in other retailers’ premises, and employs more than 1000 people.

Schuh was originally going to be named Lizard, after a small wholesaling operation run by Mr Alexander.

But, over a few drinks the night before the signwriter was due to arrive to do the company’s shop front, Mr Alexander was convinced to drop the name by colleague Mike Doherty, who is still with the firm, in favour of Schuh.

"I didn’t realise it at the time, but the importance of getting the name right has been crucial to the business’s success," Mr Alexander says.

Despite his original "wee shop" aim, Mr Alexander says he’s always seen Schuh as more than just a shoe shop. "We’ve always moved with the fashions and I think that’s why we’ve stayed in tune and done well."

The company has tried to expand the product range outside footwear, but Mr Alexander says: "We tried T-shirts and jackets for a while, but it didn’t work.

"It’s better to be a specialist than a generalist. Trying to do too much can see you doing nothing at all."

Schuh does not manufacture footwear. Apart from the 70 companies whose merchandise it sells, there are also about 60 other shoemakers that help design its own-brand shoes.

An increased focus will be put on the Schuh brand footwear in the coming year, says Mr Alexander.

"As we increase the concentration on our own brand, we’ll cut this down to about 30 to build stronger relationships with key suppliers."

More UK outlets are sought. Schuh lacks a presence in England’s south west - and in London. "We’d love a London shop," says Mr Alexander. "It’s our missing link.

"Apart from returns from sales, it would give us a higher profile in fashion footwear.

"But rents are high and we’re not going to hock the family silver just to have a presence. We’ve proved our concept is in demand in England with shops in Manchester and Nottingham. So we can wait for the right opportunity, vanity is no reason just to jump in feet first."

Tom Lynch, the company’s operations director, suggests Schuh’s success has been partly attributable to its desire to offer "retail theatre" to customers.

"Schuh’s shops have music, lots of activity, well-stocked display shelves with great branded products - but there’s still a degree of customer anonymity allowing you to observe if you wish or get involved in buying."

Schuh’s share of the market, at roughly two per cent, is quite small, says Mr Lynch. But he says that means the company still has a lot to aim at.

"In the UK, there’s still large retail areas where we’re not represented, like London and the south-west.

"Expansion to date has been very considered, and future expansion will also be carefully considered."

Schuh sees itself as a "career" employer, with 90 per cent of its management positions being filled by former shop floor workers. Taking the Schuh concept to the Middle East was never part of Schuh’s business strategy.

Mr Alexander explains: "I was e-mailed by a guy in Dubai who was looking to bring retail concepts to the region. I didn’t take it seriously and rejected the idea at first. But I was convinced by the team here to look at it again.

"We eventually decided to go down the franchise route as it was a low risk entry to a new market."

Schuh in Dubai was set to launch last autumn, but the events of September 11 made it "inappropriate" at the time, Mr Alexander says.

He adds that if the franchise idea works well, it could be expanded to the rest of the Middle East region and possibly beyond.

But there are no plans to invest company capital in any other region other than the UK and Ireland at the present time.

Schuh is now owned by six shareholders, who have no desire to sell out and take the company public.

"Our preference is to keep the business private and I think we can do that."

As a former trainee taxman, Mr Alexander was once told he’d never make the grade. But in Schuh the numbers are adding up.