Its share prospectus touts Harvey Nichols as an exclusive shopping retailer renowned in the UK and internationally.
Women in fashion circles, where Harvey Nichols bags are decorative items around their Hans Crescent homes, would enthusiastically agree. Patsy and Edina, characters in the BBC TV show Absolutely Fabulous, are regulars at their favourite fashion haunt “Harvey Nicks”.
But for shoppers coming from outside London, even those outside London’s SW1, Harvey Nichols does not roll off the tongue and onto the Visa statement so easily. And that could be a problem as the Harvey Nicks empire seeks to expand outside of its swish London bunker to the far reaches of Leeds and beyond.
Harvey Nichols floats on Monday to raise between 57m and 64m to finance that expansion programme. It is seeking to exploit the success of the Knightsbridge store, which carries famous labels such as Calvin Klein, Jean Muir, Ralph Lauren and Vivienne Westwood.
This week 24,000,000 shares, expected to be priced at between 240p and 270p, will be issued – representing a 46.3 per cent stake in the Harvey Nichols Group. The offer values the store at between 132m and 148m.
The entrepreneur behind Harvey Nichols, Dickson Poon, intends to open his assault on the rest of the UK with the “lunching ladies of Leeds” as one City analyst describes it.
Scheduled to open this autumn, the 42,000sq ft Leeds store in the Victoria Quarter of Briggate will be the first Harvey Nichols standalone store outside London. The Gleneagles Hotel in Scotland also carries a small Harvey Nichols outlet.
“I don’t see why it shouldn’t be successful, there is a fairly affluent catchment area around Yorkshire,” says NatWest textiles analyst Joan D’Olier. However, the expansion has been received sceptically elsewhere because of the lack of awareness of the Harvey Nichols name outside of London. “My aunt lives in Dorset and she has never heard of Harvey Ni-chols,” says one analyst anecdotally.
But there are more than just anecdotal worries about the expansion plans for the store whose fortunes have been turned around over the past five years. Other analysts suggest Leeds may be the wrong choice for the first store outside London – with Glasgow considered to be a better option because of its high proportion of department stores. A Management Horizons shopping index study last year ranked top shopping locations – placing Glasgow first with Leeds not even in the top ten.
Poon’s relationship with Harvey Nichols started in October 1991, when Dickson Concepts bought it for 53.7m from the Burton Group. In five years, he has increased profits by 600 per cent, turning a pre- tax profit of 1.4m in the year ended September 1990 into 9.1m – the estimate for the year ended March 31, 1996.
For the store’s 150,000sq ft of retail space in Knightsbridge, profits of 617 per square foot is very high, says NatWest’s D’Olier. A store on the same site was founded in 1 by Benjamin Harvey to sell linen. Colonel Nichols was brought in seven years later as a partner and the store expanded into selling oriental carpets, silks and fabrics.
In 1919 it was bought by the department store Debenhams and was swallowed up into the Burton Group when the group bought Debenhams in 1985.
The present owner Dickson Concepts (International), listed on the Hong Kong Stock Exchange, manufactures, retails and distributes branded luxury goods. It will hold the majority 56.4 per cent of Harvey Nichols Group when it floats and Poon will become the store’s non-executive chairman.
The store’s chief executive Joseph Wan, who at 42 is three years senior to Poon, is described as a “rigorous cost cutter” by one City analyst who has watched his performance since he joined Harvey Nichols in 1992.
It is Wan who has been credited with turning a store, tarnished by its downmarket association with former owner Burton Group, into a profitable exclusive store that attracts rich wives of Middle Eastern sheikhs and members of the royal family.
City analysts are enthusiastic about Poon’s decision to float, supporting Joseph Wan’s comments: “We are an ambitious group and want to grow our business, but we will not run before we can walk.”
NatWest associate director of European research David Chapman believes Poon has chosen well with the Leeds store. “Harvey Nicks has realised there is a life beyond the West End. It is a concept that can be taken outside the London area.”
At the moment Harvey Nichols isn’t really a brand – it’s just a store that carries other brands. To expand and exploit the opportunities through the four stores it plans in the UK it will have to put emphasis into brand building.
Its Knightsbridge rival Harrods has successfully developed its brand – gaining prestige not only throughout the UK but also internationally by maintaining its large share of the tourist spend, says D’Olier.
She believes Harvey Nichols’ success has been its clear focus at the top end of the fashion market, which represents 46.3 per cent of the value of its sales, according to figures for the year to March 31, 1995. Its main competition comes from Harrods, Selfridges and Liberty.
Selfridges, part of the poorly performing Sears group, also has plans to expand in the North, while Liberty is suffering from a marketing deficiency and under a new chief executive may cut back on existing stores outside its flagship in London’s Regent Street.
The success of Harvey Nichols and Harrods is bucking the trend among department stores – which are frequently looked upon as the dinosaurs of the high street.
A Harrods spokesman says despite the perception of the store being a tourist theme park, the majority of its customers are local. He says 20 per cent of shoppers would be foreign visitors (Harrods does not like to use the word tourist).
The Harrods spokesman claims Harvey Nichols is not yet an established brand, being primarily an umbrella store for other fashion retailers. It has yet to fully exploit the brand name for own-label products. But at the same time Harrods is also believed to be preparing to float in a move that could value it at 1bn.
Ironically, the most exposure the Harvey Nichols name has had outside London is via Absolutely Fabulous and its famous fashion connections. But Sammy Harari, managing director of the advertising agency Harari Page, which has handled the 1m Harvey Nichols account since 1991, says the store does not promote the Patsy and Edina link.
“That was just a media hook. In fact if you look at its trading record you’ll see that Harvey Nichols is a very serious retail business,” he says.
Expanding its Knightsbridge flagship to no more than four regional stores and building on the success of its fifth floor restaurant will need a considerable boost in its current advertising – mainly limited to ads in fashion magazines. And to its own high-quality Harvey Nichols fashion magazine sold on newsstands.
Harari would not reveal Harvey Nichols’ marketing and advertising plans for the opening of its Leeds store or for the new restaurant due to open this summer on the top floor of London’s Oxo Tower. But its previous strategy of allowing word of mouth to spread the message might not be enough in other cities. To keep the empire to just four stores is sensible, but Harvey Nichols marketing will have to shift from promoting one single store to promoting a group. By its very nature that will dilute its exclusivity.
Neither Mary Portas, marketing services director at Harvey Nichols, nor Wan or any directors at the store would comment on marketing plans for the group post-float. But the intention, briefly outlined in its prospectus, is to open stores, possibly in Glasgow or Edinburgh after Leeds – targeting city centres with high quality shopping and large catchments of affluent shoppers.
Heathrow Airport is another important area and analysts are surprised Harvey Nichols is not targeting it, following the success of Liberty, Selfridges and Harrods int this area.
Attempts to build the brand overseas are also outlined in the prospectus. The name is already being employed in some Asian markets, but Hong Kong buyers are not thought to be as impressed by Harvey Nichols as upmarket London.
Poon has turned around a store that was barely showing profits into the posh “place to be seen”. That is what will attract shareholders to the float. But to keep those new shareholders happy, the group’s performance as a public company will have to match the success of its flagship Knightsbridge store.
That will require a more concrete approach to branding, the creation of a group identity that will mean as much to people in Leeds, Manchester, Glasgow and Edinburgh as it does to those in London. But it is operating in the fashion market, which is notoriously fickle.