THE FRIDAY INTERVIEW/David Riddiford, chief executive of Arnotts:SITTING IN the Arnotts boardroom overlooking Henry Street, the noise of the buskers outside gives an illusion of a hectic trading day on Dublin's busiest shopping strip. Sadly, the reality is somewhat different.
David Riddiford, chief executive of department store Arnotts, says footfall on the street this year is down about 10 per cent, and many people are merely window shopping.
He’s coy about the exact impact of this on Arnotts’ sales, but says most retailers have seen their turnover fall by 20 to 40 per cent.
“It’s not easy,” he says. “Anybody who tells you it is is a bit of a Pinocchio.”
May was “our worst month”, but sales have picked up slightly in the second half of the year. He thinks Arnotts is performing on a par with rival Brown Thomas and ahead of near neighbour Clerys. “Debenhams is probably slightly ahead of the rest of us,” he concedes.
Next week’s budget offers an opportunity for Minister for Finance Brian Lenihan to do something to help stimulate retail activity, but Riddiford isn’t hopeful.
“I don’t hold out any great expectations,” he says with a sigh. “For me, the most important thing is to regain some sense of stability so people can regain their confidence. People talk about cuts in the VAT rates, but I just can’t see how they have the financial ability to reduce any sort of taxes.”
Arnotts has made its own cuts this year, reducing its costs by 28 per cent and making 37 of its 750 staff redundant. Those earning more than €40,000 a year have taken 10 days’ unpaid leave.
“That’s the equivalent of a 4 or 5 per cent pay cut,” he says.
Back to business, the 25-year veteran of retail has noticed a key difference in this recession.
“In previous recessions certain parts of the business would have been recession proof, for example cosmetics. This time around everything seems to have dropped at the same rate. That’s quite an interesting new dynamic.”
Against this backdrop it’s a surprise to discover that Arnotts has extended its trading hours to 66 a week by closing later in the evening and on Saturdays. “We’ll review that in the New Year,” Riddiford says.
Arnotts is also planning to break with tradition and open on St Stephen’s Day, with Riddiford expecting 50,000 shoppers to turn up in search of a bargain.
This strategy won’t sit well with everyone, but Riddiford believes it will become an established part of the retail culture in Ireland.
“We’ll review it in January, but I’m pretty optimistic it will be a good day.”
The Christmas shopping period is when retailers, especially those in the rag trade, earn their crust, and it will test if Riddiford is on top of his game.
“Christmas is the equivalent to two months [trading],” Riddiford explains. “Every retail business makes virtually 100 per cent of its profit in the last seven or eight weeks of the year. The range between gloom and ecstasy can be very fine.”
Arnotts’ financial year closes at the end of January, so is Riddiford feeling gloomy or ecstatic? “December was our worst month of the year last year,” he says. “We’re forecasting it to be slightly down on last year.”
It’s not all doom and gloom. At an operating level, the Arnotts store on Henry Street will make a “reasonable profit” in the current year, Riddiford says. Ditto its nearby Boyers subsidiary.
However, substantial interest costs relating to its pending Northern Quarter property play will push the company into the red.
The retailer isn’t standing still during the recession. Arnotts has spent €5 million this year modernising its flagship store in a bid to refocus its offering at 25- to 45-year-old women. It also invested €10 million on its new Arnotts Project shop in the Jervis Street shopping centre.
This store was originally to have housed a relocated Arnotts while the Northern Quarter was being built, but planning delays and the credit crunch scuppered that plan and forced a rethink. Arnotts Project is a new concept, offering funky fashion and quirky gifts aimed at a younger audience.
“We didn’t intend to trade two stores simultaneously alongside each other so that’s why we decided to open Jervis as a young, contemporary outlet so as not to cannibalise this store, which is only 200 metres away.”
What of the much-hyped Northern Quarter? The brainchild of Arnotts’ majority shareholder Richard Nesbitt, it was to be an €800 million mixed development on a prime 5.5-acre site off O’Connell Street.
Nesbitt’s grand plan had the backing of financier Niall McFadden and Anglo Irish Bank, which both took substantial shareholdings in the project. Construction was to have started in August 2008 and completed by 2012. But a knockback by An Bord Pleanála changed things.
“By the time they had approved it, the financial situation had started to deteriorate, so we took the decision to defer it to January 2009. Then in September 2008 everything fell off a cliff and we had to go back to square one,” Riddiford says. “I mean, thank God we didn’t start the scheme. That would have been fatal for us.”
Riddiford says the project will need “some [financial] re-engineering”.
“Realistically, we’re not going to be able to borrow that amount in one fell swoop, so I would think construction will be unable to start until some time in 2011. With Anglo Irish being the main backer, we need to understand what’s happening with them and their status, and we would need to see some upside in the rental market before it’s likely to start again.”
Construction would take three years, pushing the opening back to 2014. Riddiford concedes that this could just as easily be 2015 or 2016.
“I would hope it’s going to happen,” he adds. “The requirement for the renovation of the north side of Dublin is as strong now as it was when we first looked at this project.”
Given Anglo’s involvement, will Arnotts/ Northern Quarter end up in the arms of Nama? “It’s not really my expertise,” Riddiford says. “I would suspect it’s likely to happen, from my amateurish read of it. I’m just a mere retailer; I’m not really a financial engineer.”
In fact, Riddiford is more than a retailer. Born near Leicester, he graduated from Oxford with a law degree and worked for a time as a public prosecutor in Rhodesia (now Zimbabwe). He returned to Britain and tried his hand as a trainee accountant with PricewaterhouseCoopers. “I couldn’t stand it,” he says with a laugh.
Riddiford then spent five years with Levi Strauss in product management and marketing. His break into retail came in 1984 when he landed a role with the Burton Group in Britain.
The Englishman also spent time working for Harvey Nichols, he ran a duty-free operation in Hong Kong and he was director of buying and merchandising with Selfridges, pre-Galen Weston. Riddiford returned to Hong Kong in 2004 to “modernise” Lane Crawford, a high-end fashion retailer.
In 2006, he arrived in Ireland to lead the rejuvenation of Arnotts. “Richard seduced me,” he says. “He wove this story about the Northern Quarter. You don’t get many chances in your life to get involved in the regeneration in the heart of a capital city.”
At 55, Riddiford accepts that he might not get to see this project through to the end. “I’m getting on a bit now,” he says, “but, hopefully, it should start in the next two or three years.”
Riddiford also has ideas on how the Arnotts brand might be expanded beyond its traditional Henry Street base. “Cork, Galway and possibly other cities could sustain an Arnotts branded store.”
Arnotts has also jazzed up its online offering. “The internet must be a huge opportunity for us.”
For now, Riddiford is enjoying the Irish way of life in spite of the recession.
“I live in Sandymount; there are very few capital cities in the world where you could be 10 minutes from the office and two minutes from the beach. I enjoy the banter here as well, except when it comes to rugby.
“ When you get to my stage of life, it’s more important to have a quality of life.”
On the record
Name: David Riddiford.
Job: chief executive of Arnotts.
Why is he in the news? Arnotts has decided to break with tradition and open for trading on St Stephen's Day.
Age: 55.
Lives: Sandymount, Dublin.
Hobbies: A "very keen" golfer (14 handicap). Also enjoys skiing.
Something we might expect: "I love shopping."
Something that might surprise: He owns more than 200 shirts, about half of which he has never worn.
