Interview: Sir Stanley Kalms - Don't mess with Sir Stanley
HE HAS SHARES IN DIXONS WORTH pounds 30M. HE PAID HIMSELF pounds 809,000 LAST YEAR. HE HAS THE YACHT, THE HOUSES AND THE KNIGHTHOOD. WHAT MORE DOES SIR STANLEY KALMS WANT?
Wednesday 15 December 1999
The attention to detail is typical of the man who has taken Dixons from a single London camera shop 50 years ago to one of Britain's largest retailers. He gets a computer print-out of the previous day's sales at the crack of dawn and rings his chief executive, John Clare, nearly every day before 8am to talk the figures through. As one former director says: "He's on to John all the time. Dixons is his life. He wouldn't know what to do without it."
Aggressive, even bullying, Sir Stanley's hands-on style has wrestled Dixons to the top of the business tree and kept it there while other retail icons of his generation such as Sir Ralph Halpern and Gerald Ratner have faded.
His strong views are well-known. He has challenged everyone and everything from the chief rabbi (he once called for the chief rabbi's resignation) to shop security (he argued for security guards to be armed with truncheons). A prominent supporter of the Conservative party, he has battled long and hard against the introduction of the euro ("believe me, it won't happen").
One of his former managers says: "He's got a brilliant commercial mind and a colossal intellect, though it is untrained. His is the most formidable business brain I've encountered."
Sir Stanley is on good form, and with good reason. At an age when many businessman have retired to tend the garden or the yacht he finds himself heading a retail group whose growth is accelerating more rapidly than at any point since he took over his father's photographic studio in Edgware, north London, in 1948.
In the past year or so, Dixons has launched Freeserve, the Internet service provider, and taken it to a stock market flotation which now values the 14-month-old company at pounds 5bn. Last month Dixons splashed out pounds 444m on buying Elkjop, a Scandinavian chain of electrical shops, with more European deals on the cards. All this is backed by the surge in digital technology which is delivering a constant stream of new products such as digital cameras, e-mail mobile phones and digital televisions.
Surely the events of the last 12 months must have surprised even the canny Kalms? "Less than you might imagine," he says with a knowing smile. "In business, you look at lots of opportunities and open lots of doors. We'd have to admit, though, that Freeserve is the biggest thing we've done. We could never had expected that kind of market reaction."
His direct involvement with Freeserve's development was limited, though he created the atmosphere that spawned it. "You can't precisely identify where it came from. I wasn't playing in the bath and suddenly crying `Eureka'. It came out of the business. There was pressure from the top down to find a door into e-commerce. That might have been my only contribution."
Sir Stanley gives credit to John Pluthero, Freeserve's chief executive, for developing the idea and to John Clare for working the concept through. But Sir Stanley deserves credit for backing a bold idea he could easily have throttled at birth as being too risky.
"I don't think any of our projections extrapolated where it would go to. But once the idea had been developed it went very fast. Floating it then became inevitable because it had become so big it could have lop- sided Dixons."
In share price terms it still could. Dixons' 80 per cent stake in Freeserve means that a collapse in the Internet bubble would trigger a collapse in Dixons shares, which have trebled since Freeserve's launch. Sir Stanley says he is not interested in this and Freeserve cannot bring Dixons down "because it is ring-fenced".
Even so, it could be a canny move to step down now with the company riding so high. He bridles at the very thought of retirement. "I'm running on all cylinders. The moment I retire will be when I no longer feel I can operate that way. At my age, that clearly is in the not too distant future. But it is not something for which we have set a deadline."
Indeed, Sir Stanley appears ready to stay on for several years as executive chairman. "I'm a pretty good hand on the helm. We've got a lot of young people in the business and sometimes it is good to have a bit of experience at the top. And someone like me could never be a non-executive chairman. I've never ever indicated when I will retire. It's not a pressing issue. I'm a little bit against this ageism thing that suggests that at 68 I'm less effective. As long as I'm blessed with good health and still enjoying it, it should not be an issue."
He certainly looks well. A shortish man with an expanding midriff he has a healthy thatch of hair for a man his age. He moves around his office relatively slowly but there is nothing wrong with his mind. As one analyst says: "Every year I go to the Dixons shareholder meeting and look for signs of a slowdown. But he is always incredibly sharp and gives very quick responses to questions. He is still very impressive." Colleagues say he will never retire. "I've always thought he would be carried out in a box," one says.
In any case, Sir Stanley argues, there is no need for him to attempt to quit just because something might go wrong with the so-called Internet bubble. "Freeserve is not my landmark," he cautions. "Dixons is."
It is a landmark he guards jealously. He is right that the business is at a crucial stage. On the home front, Dixons stands on threshold of a new technological era with digital technology poised to break through to the mass market. Abroad, Dixons is in the early stages of its first foray overseas since the disastrous acquisition of the US electrical chain Silo in the 1980s.
The Elkjop deal takes Dixons into Norway, Sweden and Denmark. "We've been looking at Europe for a long time. There is massive scope for expansion and we have been keen to exploit a single market if not a single currency."
Will there be other deals? "I think so. We are in that mode now. You'd expect to see a few things happen but we're still a bit fussy." He declines to name pos-
sible markets but the focus is western Europe and particularly markets it can dominate. That rules out France where rival Kingfisher has stolen a march by buying Darty and But. "We are natural number ones," he says. "Our mentality is that of the market leader."
That would also rule out the US, where Silo over-expanded and plunged from profit to loss. Dixons was forced to offload it with huge financial write-offs. "This is another reason why management continuity is important," warns Sir Stanley, giving himself another reason not to retire.
With Dixons shares the most highly rated in the sector at present and profits hitting pounds 237m on sales of pounds 3.2bn last year, perhaps it is the desire to make Dixons an international power that drives Sir Stanley on.
It can't be money. He earned pounds 809,000 at Dixons last year and has shares worth pounds 30m. He was a millionaire at the age of 31 following the group's stock market flotation in 1962 and has all the trappings of success. There is the luxury London apartment, the holiday home in Portugal and the 90ft yacht, often moored in the south of France
He has the knighthood, bestowed in 1996 for services to electrical retailing. And he has the endless list of extra-curricular activities that top businessmen inevitably accrue. This includes the Dixons Bradford City Technology College and Business for Sterling, the lobby group he founded to help keep Britain out of the euro. Then there is his politics, where his views put him on the side of the rabidly Conservative.
Perhaps the roots of his ambition lie in his background. Though he was born in Britain, Sir Stanley's grandparents were Jewish immigrants from Russia and Poland. His parents initially settled in the East End of London before moving to Hendon. It was his father, Charles Kalms, who sowed the seeds of the Dixons empire when he set up a photographic studio under that name in Edgware in 1937. He grew the business to five studios but had scaled it back to one by the time the teenage Stanley arrived in the business at the age of 16.
He says: "Dad left school at 14 and came from a large East End family (he had 11 brothers and sisters). I think a factor that drove many Jewish people in the East End was to get the hell out of there. My Dad was a placid, relaxed man. He was modestly ambitious. My mum was more aggressive. Together they created this little monster." Colleagues say his background has been an influence. "It may be part of the Jewish immigrant thing, fighting against the odds, being an outsider," says one former Dixons manager. Sir Stanley doesn't deny it. "Many of my father's generation set up small businesses. The next generation was blessed with a little more education and opportunity to create bigger businesses. I remember leaving school at 16 to join the business and thinking, `What have I got to do here?' It was dying on its feet."
Colleagues also say Sir Stanley's background may be a factor in his management style which is described as aggressive to the point of being deliberately confrontational. "He could be rough with people," one former staffer says. " I think there was a certain amount of management by fear. He'd shout and swear but I think he has mellowed a bit recently."
Some say Kalms was so insecure he used to check all the faxes that came into the building. Others suggest he often appeared worried that people might be manoeuvring behind his back. Though his management style has been described as one of the "benign despot", he does inspire loyalty. His secretary, Olive Morgan, has worked for him for 23 years. John Clare arrived in 1985 and several others directors have stayed for a decade or more. "Dixons has one of the best management teams in the sector and Stanley must take credit for that," says Nick Bubb, retail analyst at SG Securities.
Another feature of his management style is his penchant for cheerful plagiarism. The Link mobile phone business was based on independent start- ups such as Carphone Warehouse. Jakarta, the computer games chain, followed Game and Electronics Boutiques. Even PC World was an acquisition though it only had four stores when Dixons bought it.
"Plagiarism is an essential management skill," he has said.
Dixons is ferociously competitive but also a natural monopolist. It has suffered regular run-ins with the competition authorities on everything from PC prices to warranty policies but always come out with a clean bill of health.
One could also argue that Dixons has been lucky. At several points in the last few years Dixons has looked vulnerable only for events to turn out in its favour. In the mid-1990s, for example, the UK electrical retail market effectively fell into Dixons' lap when Rumbelows then a host of electricity companies pulled the plug on their stores.
Sir Stanley showed his brutal side in 1984 after his bloody takeover of Currys, the family-controlled electrical retailer. He sacked almost the entire Curry family within days.
Aggressive takeovers have proved a hallmark. Dixons' failed pounds 1.75bn hostile bid for Kingfisher, then called Woolworths in 1986, was a controversial battle that had the City enthralled. The tables were turned when Sir Geoffrey Mulcahy launched a bid for Dixons three years later only to pull back when the deal was referred to the competition authorities.
Perhaps now, with Dixons shares so strong, Sir Stanley might take a tilt at Kingfisher again? "I would never say never, but it's not in my mind," he says with a smile. "Geoff and I are in a stand-off position now. We both won one and lost one. That's probably a good way to leave it."
And the future? One sadness is that there are no family members in the business to inherit the lead role. Sir Stanley's three children worked at Dixons at one point but left for pastures new.
There is a hint of regret on this subject but he remains upbeat. "I never saw this company as a dynasty," he says. "They rarely work out. This is a business that creates wealth and value. I have achieved what I wanted to achieve."
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