Eason chief hopes the next chapter at iconic store will have a happy ending
Adapting the 127-year-old grand dame of booksellers to the world of modern retailing is a big challenge, admits Conor Whelan
“One can’t deny that things are improving, but I see at least another 18 months before we see a sustained level of growth in retail.” Conor Whelan at Eason’s flagship store on O’Connell Street, Dublin. Photograph: Eric Luke
On a side table of an office on the top floor of Eason & Son, the 127-year-old grand dame of Irish books-to-stationery retailing, is a collection of remnants from a glorious past.
Conor Whelan, the chief executive of Eason, who is tasked with ensuring the company survives into the future, picks up each artefact in turn to explain it.
“One of the first things I wanted to do after I was appointed was to protect all these documents by bringing an archivist in from UCD to protect them,” he recalls.
Gingerly, the accountant holds a pamphlet written by trade union leader Jim Larkin warning the company not to stock the newspapers of William Martin Murphy in the thick of the 1913 lockout of workers.
Another letter is from Charles Eason in 1886 to British retailer WH Smith, inquiring whether he could buy out the company. “We like to think that it was Ireland’s first management buyout,” Whelan remarks.
There are notes too from the Eason family recollecting the start of the Easter Rising in 1916 and a richly-illustrated book which was presented to Charles Eason II in 1925 to mark his 50th year in the firm.
It is hard not to be impressed by the history of the Eason brand. Like nearby iconic retailers Clerys and Arnotts, it is part of the fabric of Dublin city centre. Unlike Clerys and Arnotts, however, Eason has survived the financial crisis under the same owners. That is not to say that nothing has changed.
Whelan was appointed as managing director of Eason in September 2009 at one of its lowest points. The previous January it had breached its loan covenants, and it went on to lose €10 million in its financial year to January 2010.
“This business was in serious need of restructuring when I took over,” Whelan recalls. “We had to work out how to sustain it and transform it in terms of succeeding into the future.”
“Eason was Irish. It was iconic and of significant scale to interest me. I liked the challenge of the turnaround.”
The extent of the economic downturn, took him by surprise. “I don’t think anybody recognised the size of the challenge.”
Whelan faced problems both specific to Eason such as a need to modernise and poor overseas investments. Then there were the bigger trends: pressure from online competitors like Amazon; flog-books-cheap merchants like Tesco; and the general Irish economic malaise. “It was a bit of a double whammy,” he admits.
Whelan has an array of bullet points outlining what has happened to Eason since he took over in 2009.
First, he talks through Eason’s latest annual results. Eason Group, which incorporates 65 own and franchise stores, an online arm and a wholesale business, had, he says, made a net profit of €2.3 million to January 2014, versus €2.6 million the previous year.
There was an operating loss of €200,000 because of a €2.2 million depreciation charge following capital investments in stores and technology. Revenues were down 7.1 per cent to €227.4 million.
The group’s core retail market was, he says, down 5.6 per cent, with revenues from franchises down 8 per cent. The group’s wholesale business declined sharply by 18 per cent.
Eason’s balance sheet remains strong, with shareholder funds rising by €4.3 million to €70.6 million, and net debt standing at just €1.1 million.
“2013 was extremely difficult for the retail trade in the Republic of Ireland,” Whelan says. “We obviously have continued consumer depression because of the ongoing austerity and property tax, etc.”
A lack of new bestsellers such as the Hunger Games series had combined with a hot summer in 2013 to make things worse.
No dividend, Whelan says, was being paid to its 235 shareholders, made up of five families and staff, as a result of the continued downward trend in trading.
After modest dividends the previous two years, it was back to a freeze, first introduced after 2008.
“I don’t think shareholders will be terribly surprised,” Whelan says. “They won’t be happy but . . . We are just coming out of the restructuring phase and hopefully into the sustainability arena. In light of the cost of restructuring [a dividend] wouldn’t be appropriate.”
Eason is leaner since Whelan first arrived. He has disposed of troubled businesses in South Africa and the UK, and closed five loss-making stores in Ireland.
Franchise numbers have almost doubled since 2010, however, to 29 outlets.
A big change Whelan identifies is a €12.5 million investment in IT systems. It was “very poor” before, he says, “but now I can see what is going on”.
The system, he admits, was not in its 29 franchise stores, leading to “less visibility”.
The next big change, he says, was attacking Eason’s “unsustainable” cost base.
Since Whelan took over, 220 people have been made redundant and many senior managers have been replaced. This has not endeared him to some employees.
But Eason’s wage bill for its 700 full-time remaining staff is down by €6 million. Closure of a superannuation pension scheme saved another €5 million.
“I can’t think of any box we didn’t tick in terms of the restructuring and turnaround that we didn’t do,” Whelan says.
It has not all been cuts, he says. There has also been an investment programme which has revamped its tops 15 stores. Two flagship stores in Belfast and Cork have opened and eight more stores have been refurbished.
“Large amounts of money had been invested in a chain of stores in the UK and in a business in South Africa and not invested in the existing estate, that had to be changed.”
Earlier this year, Eason refinanced all its borrowings with Barclays Bank for the next three years. It has a credit line of €20 million, which Whelan describes as an “endorsement” of strategy.
“I see it as being very positive. We have worked with them for close to five years. I know how they operate and what they want. Their level of involvement is the appropriate level.”
Whelan believes the “heavy lifting” is done in terms of right-sizing the business.
“Phase one from 2010 up until the middle of 2013 was about restructuring first while ensuring we continue to invest in the business,” he says.
“Lots of retailers were battening down the hatches, but we knew we could not just cut costs,we had grow revenues.”
Eason’s board has changed too. In 2010, James Osbourne was appointed chairman, and Eason has brought in experienced non-executive directors Sharon McCabe, the pharmacist, and Gervaise Slowey, the chief executive of Denis O’Brien’s radio group Communicorp.
Does Osbourne, a boardroom veteran with Ryanair and a former managing partner of A&L Goodbody Solicitors, ever discuss his stint with Independent News & Media, which saw him voted off the board by Denis O’Brien amongst others?
“No comment,” Whelan says. “All I know was it was me and Gavin O’Reilly [then INM’s chief executive] reporting to him at the same time. It was a very challenging time for James. It was short and sweet.”
Whelan says this issue is in the past as the company now has more shareholder representatives on its board.
Another big move for shareholders last year was the separation of its property and trade business. This led to speculation that one or other part might be sold.
“This was done in the best interests of shareholders to put the most effective structure in place for whatever the plan is in the future,” Whelan says.
“The chairman has been clear to shareholders. This is about first restructure, then sustain it, and then try to transform the business.
“If at the appropriate juncture there is an appetite among shareholders to look at other options, then we will.
“There is no agenda with the board or coming from the shareholders in relation to what are those options.
“Why would you look at those options in a very depressed commercial property market and at a time when the business is hopefully recovering? The value is in the future, not today.”
Whelan’s immediate focus is on lessening Eason’s dependence on books and news sales by developing new revenue streams. A range of innovations are being worked on.
Two of the biggest are Easonology (selling products such as puzzles and games to encourage brain development for all ages) and Department 51 (selling teenagers not only books but complementary merchandise).
Eason was hit last year by the loss of a key store in Dublin Airport, but it has other expansion plans for its physical presence.
“We won’t double our franchises again, but a number in the mid-30s is what we aspire to,” he says. Eason has recently opened new outlets in Connolly Station and Killarney, which are doing well.
Going online is another mountain. Eason.com has seen its sales increase five-fold under Whelan, but he admits this was off a “very low base”.
“Online would be single digit [percentage of total sales]. I don’t anticipate it being any more than high single digit,” he says.
The target is to be the biggest Irish-owned online bookseller, but he admits there is little hope of making a real dent on the mighty Amazon.
“Our ambition is to be the leading player in online in Ireland with say 10 or 15 per cent of the market,” he says.
“We will always be a bricks-and-mortar retailer in the main.”
Eason’s revamped website has not been greeted with enthusiasm by all stakeholders.
Admitting it is a “sensitive issue”, Whelan says: “We are not competing head-to-head with the high street, that is the way we see it.
“Those who shop online shop online. We respect the territories franchisees are in and don’t canvas within them.”
Whelan says that Eason’s slogan, “Whatever you’re into, get into Eason”, reflects its new focus on developing multiple niches to drive up sales.
“I am sounding very marketing now, but we are trying to celebrate our customer interests all under the one roof.”
Part of this, he says, was the launch of a loyalty programme which has attracted an impressive 225,000 members.
A children’s literacy campaign championed by 2FM’s Ryan Tubridy has also helped its brand.
The transformation has been hard for staff. In June. a majority of the staff at Eason voted in favour of accepting pay cuts of between 4 per cent and 10 per cent, having previously rejected it.
“In terms of large scale cuts I would like to think that this is it,” Whelan says. “We have agreement in terms of reduced terms and conditions for two years with staff which gives us sufficient time to sustain the business further and to benefit from the upturn in the economy, which we are beginning to see, and to develop new products.”
The “cost agenda”, he says, is never off the table, but he did not see any more big cuts in the foreseeable future for staff.
“I am extremely conscious of the impact the cost reduction programme has had on our loyal employees.”
He says Eason has tried to make the company a more attractive place to work by investing in training and development.
How much has Whelan’s own salary come down? He declines to discuss individuals, but he says all executive management took a pay cut of up to 10 per cent.
Do senior management receive bonuses? “You are now into confidential employment contracts. It is a very sensitive issue,” he says. “Any bonuses are all performance related.”
Was there one last year? “For any senior management there is a performance-related bonus in place, but if the targets are not achieved, no bonuses are paid.”
Whelan says his management are “not in ivory towers” and that he had made it “abundantly clear” that cuts were from the top down.
Eason’s nationwide store footprint places Whelan in a good position to gauge the Irish economic recovery. He is also the incoming chair of Retail Ireland, the industry lobby group, allowing him see the national picture too.
“One can’t deny that things are improving, but I see at least another 18 months before we see a sustained level of growth in retail,” he says.
“We can’t take the foot off the pedal but, yes, I am more optimistic than I have been in the last couple of years.”
Whelan says there was a “long list” of things the Government could do help indigenous retail, from reducing PRSI to making it less expensive to hire and fire people, to reducing the minimum wage.
“It has felt like a bit of a lonely place as a domestic retailer,” he says, because domestic retailers, he believes, can be forgotten amid the excitement of new foreign direct investment.
On the table near Whelan is a 426-page tome called Eason & Son: a History. It was written in 1989 by academic LM Cullen. If the book was revisited, how does Whelan believe he will be viewed as a leader?
“One is that they brought the right professional manager in to lead a very good team in a very challenging business strategy and that we did that and sustained the business, and delivered for shareholders and employees,” he says.
“The second legacy, I would like to think, was that I was true to my word in terms of investing in people and I would leave the organisation a better retailer as a result.”
The cuts made, the second chapter for Whelan begins.
CV: Conor Whelan Name: Conor Whelan Position: Managing director Eason Age: 52 Education: Degree in business from Trinity College Dublin. Fellow of the Institute of Chartered Accountants in Ireland. Family: Married to Jean, one teenage daughter Molly. Lives: Terenure, Dublin 6W. Hobbies: Tennis, golf, running, gardening. Something you would expect: He likes reading thrillers, business books and biographies. Currently reading Catch 22 and admits he has read the first volume of Fifty Shades of Grey. “My wife was horrified, but I had to see why it was selling so much . . . I had no inclination to read books two and three.” Something that might surprise: He has Australian citizenship, and likes playing the harmonica.