“Is he famous?” questions a confused shopper watching a dapper man in a smart blue blazer having his photograph taken on the shop floor of the Tesco Extra store in Cheshunt, Hertfordshire. The answer is no – he is father-of-four, tennis-mad F&F chief executive Richard Price who erupts with laughter at the suggestion, escaping the photoshoot to chat over the customer’s shopping trolley.
Warm and approachable, Price jogs back to proudly show Drapers the latest drop of spring 16 product, strolling the aisles in a F&F blazer and crisp white shirt, teamed with a pair of Diesel jeans and tan Loake brogues. As comfortable on the shop floor as in the boardroom, he visits the Cheshunt store at least once a week, holding meetings with the F&F directors in the 10,500 sq ft fashion area, a practice initiated in the eight months since he became chief executive.
His move in June from managing director of BHS may have surprised some, coming in a year characterised for Tesco by accounting scandals, serious fraud investigations and plummeting profits.
Just as Price secured the top job at F&F in February 2015, Tesco chief executive Dave Lewis announced the closure of 43 unprofitable stores and admitted the grocer had overstated its profit forecast for the first half of 2014 by £263m. While F&F performance is not broken out from the overall statistics, in the six months to August 29 Tesco profits fell 55%, from £779m to £354m, with UK like-for-like sales down 1.1%.
Not exactly the most auspicious circumstances under which to start a new job, but Price was undeterred.
“I’d always worked in clothing multiples and this just felt right, like the next challenge of my career,” he explains. “Having worked for [Sir] Philip [Green, chairman of Arcadia] for two and a half years [as BHS managing director] I was quite keen to get back to a plc.
“The clincher was when I met Dave Lewis and understood his vision. Tesco was going through turbulent times and a change of leadership, but Dave was inspirational and compelling. I felt like I wanted to be part of the journey Tesco was on. You never lose your desire to learn and I’m learning a huge amount.”
Under the direction of former F&F chief Jason Tarry, now Tesco’s chief product officer, Price meets other business leaders in fresh food, packaged food and general merchandise on a weekly basis to determine what the Tesco shopper wants from F&F.
“I’m under no illusion, we’re a Tesco clothing brand and our customer is a Tesco customer. We don’t exist without Tesco, so it’s important to understand the dynamics of the business,” he says.
“We’ve learnt it’s important to put clothing at the start of the customer journey as once shoppers have put perishable goods into their trolley they haven’t got the headspace to try on a dress. Much of what we sell is impulsive, which is one of the reasons why affordability is so key.”
F&F spring 16
Keeping pace with the latest trends new items drop into store each week, with wider-scale phase changes every four or five weeks. Prices range from £2.50 for a jersey camisole to £99 for a suede trench coat. Hero products for spring 16 include a striped green, tan and white shift dress (£20) and four-way stretch jeans (£18). The average basket size is £25.
Womenswear currently represents 28% of sales, followed by essentials 25%, kidswear 23%, footwear and accessories 13% and menswear 11%.
According to Verdict Retail, F&F generally outperformed Tesco’s wider proposition in 2015, becoming one of its bestselling non-food offers. Last year F&F’s share of the overall clothing market was 2.9%, compared to Asda at 4.2% and Sainsbury’s at 2%.
“F&F also enjoys a slightly more affluent customer base than its supermarket rivals and ramped up its advertising campaign last year to create a more fashion-forward, urban brand image, which seems to have worked well,” notes Verdict Retail senior fashion consultant Anusha Couttigane.
Beyond Sainsbury’s Tu and George at Asda, F&F’s main competition is New Look, Primark, Matalan, H&M and Pep&Co, says Couttigane. “As a family-oriented clothing brand, it sometimes faces competition from middle-market players like Marks & Spencer.”
While in the supermarket sector George is the main rival, Price argues that most people who shop locally at Tesco don’t go to Asda, and vice versa, meaning he sees M&S and Next as F&F’s major competition.
Despite lacking a high street presence, F&F benefits from Tesco’s store network, giving it the edge on click-and-collect. Clothing is sold in all 250 Extra stores (over 50,000 sq ft), over 530 superstores (20,000 -50,000 sq ft) and 70 Metro stores (10,000 sq ft) across its wider 2,500 store portfolio nationwide. F&F is not sold in Tesco Express stores (below 3,000 sq ft), although click-and-collect is available.
F&F’s very reliance on Tesco could, however, be a cause for concern. Since 2011 Tesco has abandoned the construction of 62 large out-of-town stores, over three times as many as Sainsbury’s (13), Morrisons (four) and Asda (two) combined. According to construction industry analyst Glenigan, in 2015 Tesco shelved 49 stores, although the number of Express stores grew by 3.7%.
Price, however, is unruffled by Tesco’s shrinking store estate. “While it does affect opportunities to sell F&F in Express stores, in terms of the overall brand we’ve got more than enough space and exposure to grow,” he states confidently.
“F&F is almost as big as Next in terms of overall square footage, so I think we’ve got a phenomenal reach. Now it’s more around working the space harder and utilising it better in the stores we already have by having better product.”
According to associate partner at market information analyst CACI Louise Etherden, the “big four” supermarkets are all looking for complementary retailers to rent extra space in their biggest stores (50,000-120,000 sq ft). “The slow investment in big stores looks set to continue this year, with grocers like Tesco working out the best use for available space, whether that be leisure, catering or fashion,” Etherden reports.
CACI suggests retailers like Schuh and Mountain Warehouse could be a good fit alongside F&F. Internationally, Tesco opened Primark and Sports Direct shop-in-shops in its Hungarian supermarkets in July, although Price says there are no plans to roll out to the UK.
In October the supermarket giant did, however, begin trialling Dorothy Perkins, Burton and Evans concessions at its Tesco Extra stores in Horwich, Cardiff, Chesterfield, Bristol and Woolwich. Price will review the trial in six months, judging whether to roll this out.
“Customers said they wanted more clothing and we see it as an opportunity to create additional footfall. We find F&F performs better when we’re surrounded by other clothing retailers, because it puts customers in a clothing mindset. We’re constantly looking at potential partners, but we haven’t made any decisions about extending the current retailers we work with.”
Despite the changing shape of the Tesco portfolio, Price isn’t planning to open UK standalone F&F stores. “I believe the model works best in a Tesco store. We have natural footfall, we don’t have to pay rents and rates and there is probably a sur of shops on the high street. I think it makes sense to encapsulate F&F within a Tesco experience.”
While standalone may not be the UK strategy, it is a big part of the international business. Over the past two years F&F has grown its franchise business to 130 stores in 15 countries from Saudi Arabia to Gibraltar, which boasts the first F&F Kids store. This success was recognised at the Drapers Awards in November, with F&F scooping the award for International Fashion Retailer of the Year, alongside the Corporate Responsibility Award.
The international model encompasses wholly-owned F&F in Tesco stores in Hungary, Czech Republic, Slovakia and Poland, standalone stores in markets like Malta and the Philippines, franchises within department stores in Switzerland and in local supermarkets, as in Iceland.
In 2015 F&F began trialling seven standalone stores in the north east of the US, while six months ago it started working on a franchise model with a German supermarket with the potential to reach 200 stores.
Russia is proving more problematic. In October F&F stalled the opening of three franchises within Debenhams stores in Moscow. Unwilling to be drawn on the circumstances, Price confirms there are no immediate plans for Russia. “From a franchise point of view we’re looking at Russia amongst many other markets, but yes we would look at it again.”
The UK market represents 75% of business, with the wholly-owned central European business at 20% and franchises at 5%. While online currently represents less than 10% of sales, it is a focus for development. “We intend to use online to free up space in store for higher footfall products [such as jersey basics and essentials] and utilise online for more considered purchases like our men’s suit range (£50-£70). Merging our clothing and grocery websites is a long term objective.”
For the F&F chief executive, the overarching strategy is clarity and discipline, lessons learnt from 15 years as a merchandising manager at Next, followed by seven years as M&S trading director. This philosophy is being instilled into Price’s 500-strong team.
“The biggest cause of markdown is having too much width,” says Price decisively. “We need clear, focused ranges. We’ve worked really hard on making our shop floor look like a serious clothing player rather than a supermarket with a lot of stuff.”
This means sourcing from the best, with F&F making a conscious effort to improve product quality. The retailer works with manufacturers in Turkey, Romania and Bulgaria for blouses and soft tailoring, going to China and the Far East for technical fabrics and synthetic footwear.
“The UK is a very small part of our business, but where possible we love to support the UK. We use Britain for fast fashion, short lead time areas like jersey. Taking into account transportation costs, Britain is becoming relatively affordable,” Price adds.
The introduction of payment within 14 days for SMEs who annually deliver up to £100,000 of products – from June onwards – should prove helpful for UK suppliers such as Leicester manufacturer Basic Premier, which has supplied F&F for two years. “I think as the UK’s biggest retailer Tesco has a huge opportunity to further develop F&F’s relationship with UK clothing manufactures to take advantage of speed to market,” says general manager Mick Cheema.
“Tesco has turned the corner and has learnt from its experience, so is eager to develop more sustainable relationship with its suppliers. F&F has touched base on most of my concerns – such as shorter payment terms, ethical prices and a commitment to sustainable UK sourcing, taking into mind the eventual increases in the minimum wage to £9 per hour.”
As well as forging strong relationships with suppliers, another key objective is to convert more Tesco shoppers, as currently only 50% buy F&F. “I think we need to work on the F&F brand to make it more of an understood clothing label. Currently there’s a vast difference in our scale and authority from a grocery and clothing point of view, meaning there’s definitely potential for growth.”
So is Price frightened of the competition fighting it out in the hyper-competitive value fashion market? He grins, responding without hesitation: “Of course you have to watch everyone these days, but then they have to watch us.”
Price on: Sainsbury’s tie-up with Argos
“I haven’t really thought about it. Argos is a collection point rather than a clothing retailer and we’ve got more than enough reach in offering click-and-collect from our stores. It will be interesting to see what they do with it. I imagine they will use it as a collection point for grocery rather than clothing.”
Richard Price: CV
June 2015-date Chief executive, F&F Clothing
October 2012-March 2015 Managing director, BHS
May 2005-October 2012 Trading director, Marks & Spencer
September 1989-May 2005 Merchandise manager, Next Group