Debenhams gets a brand new image

Terry Green is taking the store upmarket by bringing big ideas to high street fashion. Peter Koenig reports
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Rarely does a man running a company get the chance to stand in front of investors, argue "this is what my business is worth", then see, without fudging, to what degree he has been believed. But that is precisely the situation in which Terry Green, the chief executive of department store chain Debenhams, will find himself in coming weeks.

On Tuesday, Green will tell a hundred City professionals gathered in London's Glaziers Hall how he plans to run Debenhams. On 22 January Burton Group shareholders are expected to approve the demerger of the department store chain from the rump, to be renamed Arcadia, which will consist of Top Man, Dorothy Perkins, Principles and several other high street multiples. On 26 January Green will see what value investors have attached to his firm - and his words.

BZW, broker to Burton Group, forecasts the City will value Debenhams at pounds 1.6 to pounds 1.7bn. The sceptics reckon less, but this time the sceptics may be wrong.

Terry Green is not well known. The 46-year-old retailer has played second fiddle to John Hoerner, the head of the Burton Group appointed to save the company in 1992 after it nearly came apart at the seams at the end of the 1980s boom. Nevertheless, the Debenhams chief is a force to be reckoned with.

Bristling with laddish energy, he speaks of his job with the passion, candour, and single-mindedness of an American rather than traditional European businessmen. When he steps to the podium in Glaziers Hall he will for the first time ever detail one of the most successful retailing strategies of the 1990s. "We're on a mission," he says with a mix of irony and sincerity, "a mission to bring fashion to the high street."

Expounding on this theme on Tuesday, Green will argue that he has repositioned Debenhams - formerly a bottom-end-of-the-scale chain - midway between Marks & Spencers and John Lewis on the one hand and the fashion outlets on the other.

He will reel off numbers: 90 stores, compared to 23 for John Lewis, 52 for House of Fraser, 13 for Allders, and 286 for M&S. In the financial year to last August Debenhams earned an operating profit of pounds 128.9m on sales of pounds 1.3bn, making it the third largest department store chain in the country after M&S and John Lewis. With sales of pounds 200 per square foot Debenhams achieved a 10 per cent operating margin - third best after M&S and Lewis.

Such numbers, however, record the past. Arguing for a bright future, Green will explain how he has adapted the global brand name game to his company's profit needs - and his customers' desires.

Debenhams' target market is 35- to 55-year-olds of both sexes who, in the words of Verdict Research analyst Richard Perks, "aspire to go out and have a good time". This market, he says, "is not interested in designer labels in the sense of the polo player on left nipple". But, he says, it does respond to brand names and the sense of associating with a particular take on life they offer.

Green's trick has been to understand Debenhams' market and create 40 brands that appeal to the different moods of his market. Though not a designer like Armani or Calvin Klein, he creates clothes brands that compete down market, then employs the designers to flesh out his vision.

The profit potential as well as the sales power of this strategy hit Green in the mid-1980s while he was working as the chief women's wear buyer for Top Shop. Top Shop, he recalls, was choc-a-bloc with concessions, blurring the store's image. Every time one of the concessions had a sale, it was Top Shop, not the designer, that took the hit.

"I decided I would co-ordinate the people selling me skirts, blouses, and dresses into brands," he says, "and I called them in and told them I would do a million pounds of business a year with each. The condition was they shared the pain of discounting."

Green devised a formula that showed suppliers how much it would cost them to go along with his plan - they covered the cost of markdowns above Top Shop's 3 per cent average discount. And with this plan he was able to boost sales, profits, and the accuracy of his forecasts. "This was when Ralph Halpern [the former head of Burton] came into my office for the first time, sat down and talked," Green says.

When, in 1992, he was made chief executive of Debenhams, he took his concept of "own brands" with him. He started Trader Jeans, then, he says: "I heard some guru from America speak on 'the casualisation of life'. Tommy Hilfiger was doing well. So I created Maine New England."

Debenhams is now branching out from pure "own brands" to sign up name designers like Jasper Conran to create exclusive lines for it. But it still focuses on price. A Jasper Conran silver crushed velvet ladies jacket on sale in Debenhams Oxford Street costs pounds 250 compared to top-of-the-fashion line counterparts in Harvey Nichols, with prices five to 10 times higher.

"What you get selling a brand," notes Debenhams finance director Matthew Roberts, "is customer loyalty. Customer loyalty drives sales going forward and guarantees a full price."

City analysts advising clients to buy or not to buy Debenhams shares next month will focus on retailing overall as well as Green's strategy. Trading in the run-up to Christmas has been subdued. Over the medium term, competition in the pounds 23bn-a-year clothing retail sector will be fierce as the line between mid-market chains and fashion outlets selling designer diffusion - discount - ranges blurs.

Many analysts wonder why John Hoerner is not taking Debenhams himself when he splits his group in two, rather than taking responsibility for the less well-performing high street fashion multiples. "It's possible," says one, "that Hoerner knows Debenhams is fully valued, while the Top Shop and Burtons Menswear are not."

Green will get his chance to confront the sceptics. He has ammunition. Debenhams has plans to increase sales per square foot through in-store advertising. "I want shopping in our stores to be like walking through the pages of a magazine," Green says. Over the next four years it will open nine new-generation stores offering customers massages and nail jobs as well as frocks and suits.

The price of Debenhams shares when they go on sale next month, however, is likely to hinge on Green himself. Funnily enough, it is here the champion "brander" has been remiss. "It's often that way," says Fiona Gilmore, a partner in the Springpoint Consultancy. "The heads of companies dependent on brand names forget they themselves are in a sense brand names."

On Tuesday all that changes. Green faces the branding challenge of a lifetime.

At the feet of the image warriors

BRAND names are associated with socio-economic groups: A1s buy Rollers. C2s buy used Escorts. But increasingly, they have become the organising principles of the consumer society - created to appeal to the needs and moods of people across money and class divisions.

Fiona Gilmore, an expert in this new-age branding, published Brand Warriors in October (HarperCollinsBusiness, pounds 20) in which she discussed brand names with the heads of UK multinationals. This is what they said:

Archie Norman, chairman, Asda: "By the late 1980s the business had comprehensively lost its way. Its roots had been abandoned in an attempt to copy the strategies of rivals Sainsbury and Tesco which were more upmarket and up-margin. [But] Asda's customers still remembered the old things about it: an honest, no-nonsense 'Yorkshire' brand synonymous with value. By becoming Britain's 'value-crusader' we are bringing our customers and colleagues together, allowing them to feel good about what they are doing."

Robert Ayling, chief executive, British Airways: "[Building on the 'World's Favourite Airline' theme established in 1983] ... The company has just spent two years planning a new corporate identity ... which is aimed at presenting British Airways as an airline of the world, born and based in Britain with a community of people passionately committed to serving the communities of the world."

Alan Palmer, marketing director, Cadbury: "Cadbury is a consumer brand directly shaped and coloured by the history of its parent company. The essence of this brand can be defined as "Cadbury-ness", and it has been built over more than a hundred years

Nick Hodges, chief executive, London International Group: "The origin of the Durex brand name is Du-rability, Re-liability, and Ex-cellence. It was registered in 1929 by the London Rubber Company. The Durex brand has rational and emotional values; our positioning is designed to communicate quality, reliability and safety and the brand's unique selling proposition: sensitivity and protection."