Habitat chief puts his faith in stylish extension

Malcolm Brighton tells Arthur Beesley that the group's Irish expansion phase is far from over

Habitat Ireland owner Malcolm Brighton has ploughed more than €5 million into the business in the past year, but he's not ready to stop spending just yet. With new stores open in Dublin, Belfast and Galway, Brighton now wants to establish a base in Cork and develop an internet offering.

The furniture and home interiors chain first came to Ireland in 1995, just as the boom years began. But while other European retailers kept to the fast lane as the economy grew, Habitat maintained only a solitary store for the best part of a decade at St Stephen's Green, Dublin.

Famous for its stripped-down styles, the chain's ambitions in the Irish market seemed for years to be as minimalist as its designs. Not any more. In spite of what Brighton describes as "tough conditions" in the Irish market, the chain is now on the growth path after a period of losses and relative stagnation.

The high-profile outlet at 7 St Stephen's Green closed down in the past fortnight to make way for a bigger, glass-fronted store in a former Bank of Ireland building that links Suffolk Street with College Green. While Philip Green's Arcadia group paid a €3 million premium for the lease on the old building, Habitat Ireland was not the beneficiary as the lease was vested in the chain's former owner.

Brighton's €2.5 million investment in the building follows expenditure of €1.7 million on a Belfast outlet that opened last August and a spend of €1.2 million on a Galway store, open since September.

The catalyst for the expansion was Brighton's purchase of the Irish franchise in April 2002 from Ikano, the foundation that owns the commercial interests of Ikea founder Ingvar Kamprad and his family.

A Londoner who has been in retailing since the age of 17, Brighton had been with Habitat for more than 25 years before the takeover and was then head of the buying and design operation.

He won't discuss the value of the deal, which was said at the time to be worth €5-€6 million, but admits he was on the point of leaving Habitat before the Kamprad family suggested he buy a franchise.

Crucially, the Kamprads indicated that such an arrangement could be structured so that Brighton - who says "I'm not a wealthy person" - could pay them over a period of years. In the end, he financed the deal with bank debt.

"It wasn't necessarily Ireland. I thought about it for a while and thought, 'yes, that would be interesting'. I looked at different options. I looked at Holland and I looked at Italy. But I quite liked the idea of Ireland because there was already a store there," he says.

"Here I was someone who knew the business. They have more chance of success in a franchise operation as someone who knows the business than someone who comes in to learn the business."

For all its urbane marketing and its relentless devotion to the notion of shopping as a lifestyle activity, Habitat was not doing well in Ireland. In spite of the boom, the store barely broke even in 2001, reversing profits in 2000.

"When you actually started applying direct costs to it the business wasn't doing as well as perhaps it was perceived to be doing as being part of a bigger operation," Brighton says.

If he attributes some of the difficulties to remote management from London, there was "nothing revolutionary" in the solutions to fundamental problems with the way some of its systems were set up. For example, containers on a regular shipment from Britain were sometimes half-full.

"We didn't cut costs. We cut out wastage. It was things like home delivery - we invested in a warehouse that holds more stock in the country - and staffing structures. It was basic stuff," he says.

"It was being managed from England. It was a different country with different requirements. Certainly it suffered from that. Interest waned a little bit. It wasn't being managed on home soil, as it were. You can't run a business from London thinking it's part of the overall operation. It's a different country and it has different requirements."

All of that had to be put right before any talk of expansion. "The business wasn't making any money when we took it over. So the first thing we had to do was to stabilise that and to try and turn it into a profitable business, which we managed to do in the first trading year."

Full details are not available for the performance last year, although operating profits were in the region of €200,000 after debt servicing costs associated with the expansion.

Trading earlier this year was far from easy, although Brighton says it has picked up since the middle of summer.

"We enjoyed a very good period up until the end of January. And then February, March through June were actually quite difficult months. The reality is that you can judge as much by what's happening in the windows with regard to the depth of sale markdowns," he says.

"Whether that's in all areas or whether that's in the home market or the big ticket market, I don't know. I have to say that July and August have been substantially better but up until June it was quite a tough time."

If this account suggests some Irish retailers are seeing signs of the same malaise that has British trade in the dumps, Brighton believes the problems are not as deep-rooted or severe.

His first priority is to bed down the new Dublin operation, after a "difficult" fit-out that had to respect the fact that part of the bank building is listed. After that is the task of growing business at the Belfast store on Arthur Street and the Galway outlet at Fairgreen Road.

"The stores in Belfast and Galway are at the peak of their cost base. Your rent year one is at the high peak, in terms of ratio. As turnover grows you hope rental costs remain as they are for five years."

Next on the agenda will be the question of opening up in Cork, the second busiest location for deliveries from Habitat.

"It's obviously an important store location for us. And we've been looking for two years to find the right locations. We have got our eye on a couple of places there but there seems to be a lot of issues with planning.

"They haven't reached the stage yet where you can talk sensibly to developers about actually taking a location. But it is something that we have got our eyes on and maybe that'll be next year's project if we can make the Dublin store here bed in properly and start to deliver."

With his vast experience in retailing, Brighton is acutely aware of how fashions change.

"When St Stephen's Green opened in 1995 it was a fantastic store, a fantastic building. But everything moves on. Things got a bit worn out and tired and it was starting to have a negative feeling in there because it was tired. It was run-down and it did need a lot of money invested in it. That was a decision we had to face. Do we invest money in that store or do we look to find a new location?"

If the younger Brighton never imagined he would set up in Ireland, he seems well settled now.