Retail boss aims to get the little things in order

Paul Kelly, chief executive of Brown Thomas and Selfridges, prefers to focus on core business strengths rather than pursue radical new schemes, he tells John McManus.

Paul Kelly knows what the media like. The Brown Thomas and Selfridges chief executive makes sure that no interview is complete without an anecdote or two from which a suitably complimentary introductory paragraph can be fashioned.

The trap is obvious, but the bait is just too tempting, as it relates to the hottest name in British football. With obvious relish, Kelly explains how last Friday he was showing some people around the Selfridges store at the Trafford Park Centre in Manchester when he spotted Wayne Rooney, England striker, World Cup hero and new Manchester United signing.

"I went over and said, 'I want to do two things. I want to welcome you to Selfridges and I want to welcome you to Old Trafford'," he says, offering by way of explanation the fact that he is an ardent Manchester United fan.

The anecdote serves a wider purpose than making the interviewer's job easier; it also gets across the fact that, despite overseeing two retail businesses with a combined turnover in the region of €800 million, Mr Kelly still takes time out to walk the floors of the shops in his purview.

After some 30 years in the business, he remains a "detail retailer". Detail retailing "is about making sure that all the small things within your business are right because they all amount to a great big thing".

It may seem like common sense but, according to Mr Kelly, a lot of people don't look at retailing that way. He does, and has been doing so at Brown Thomas Group for 20 years and more recently for four days a week at Selfridges & Co.

"I don't have any guru thing to bring to it," he says of his new role at Selfridges, which came about following the purchase of the UK store by Brown Thomas's owner, Galen Weston, in May of last year for €1.25 billion. Kelly was appointed chief executive in February this year.

Common sense and a focus on the core business would appear to be the hallmarks of the ownership of Selfridges by Wittington Investments, the Westons' family vehicle. An ambitious plan to expand into regional UK cities has been abandoned, with the focus returning to the flagship Oxford Street store. And equally ambitious plans for the redevelopment of this site with a luxury hotel have also been shelved in favour of concentrating on the core business.

"It [the expansion plan\] just doesn't make sense . . . the bulk of the business is in Oxford street and that's where - if everybody focuses times and concentration - the profits will come from," he says. "We are retailers, our business is the buying and selling of goods and services. That is what we love to do and are good at," says Kelly.

It is a strategy which has paid handsome dividends, both real and metaphorical, for the Westons at Brown Thomas over the years. Last year alone, the Irish operation paid a €5 million dividend.

Such is Mr Kelly's focus on the Grafton Street flagship that it is easy to forget the Brown Thomas Group includes three eponymous stores outside Dublin, as well as the BT2 and Awear chains.

Kelly is coy about just how important Grafton Street is, but appears comfortable with the suggestion that it accounts for about half of the group's turnover, which was €188 million in 2003.

This goes some way to explaining his focus on the Dublin store, but the tough times it has been through over the last two years may also be a factor.

In January 2003, a flood significantly damaged the building. Repairing the damage meant delaying a planned €20 million revamp of the store by the best part of 12 months. The flood could not have comes at a worse time, coinciding with a significant dip in consumer confidence as the global economy slowed. Turnover was down significantly on the previous year, dropping from €194 million to €188 million.

"It was a difficult year for us. A number of things happened - 2002 had been a fantastic year, but just after Christmas things started to dip and then we went from that into the flood," says Kelly.

The group was insured, but insurance can't compensate for the effect on shoppers of the store being a building site for most of the year, says Mr Kelly.

Despite this, the group reported a €1 million increase in pre-tax profits of €19.3 million. This came after a redundancy programme that cost €2 million, offset by €1.7 million realised through property sales. Mr Kelly is keen to stress that things are back on track and sales are expected to be up 15 per cent year on year in 2004, with an equally impressive lift in profits.

The company does not break down turnover or profit between the various divisions, but the other parts of the business are performing well, says Mr Kelly.

The Brown Thomas stores in Galway, Cork and Limerick are all cash-generating and two new BT2 stores are due to open at Blanchardstown and Dundrum, while Awear is set to grow from its current 21 stores to 35 over the next few years.

"We would not be investing in these businesses if they were not performing," says Mr Kelly.

One area in which expansion has been ruled out as far as Brown Thomas is concerned is the purchase of Clerys department store on O'Connell Street, which is deemed to be up for sale since the death of its matriarch,Mary Guiney, earlier this year.

"From a Brown Thomas point of view, we have no interest at all.From a Selfridges perspective, we have not spoken to anyone and nobody has spoken to us," he says.

Mr Kelly is alarmed at the suggestion that the redevelopment of the Grafton Street store is part of a strategy to take it down-market to meet competition from the likes of House of Fraser, which will open in the new Dundrum Shopping Centre.

Brown Thomas has always faced this sort of competition, albeit indirectly, given the penchant of Ireland's rich for shopping trips to the likes of New York and London, claims Kelly.

"Leaving aside the competition, we would be reviewing our business all the time," he says. "We have to have a product mix that's attractive to our customers and maximises the profitability of the retail space in the building."

As a consequence, out went the beds and white goods and in came more ready-to-wear women's fashion, which is now spread over two floors.

The store may now stock more low-cost items - in Brown Thomas terms, that means €70 T-shirts and €150 jeans - but that is about catering to current fashions rather than going downmarket.

A typical Brown Thomas customer is more than capable of combining a €150 pair of jeans with a €2,000 Hermes bag, ventures Mr Kelly. "We don't have cheap. If you ever went down that path, it is the path of self destruction," he warns.