Arcadia Group plc History

Company History:

Arcadia Group plc, previously known as Burton Group plc, is the second largest clothing retailer in the United Kingdom, with more than 2,000 outlets in downtowns and shopping centers throughout the country. With two exceptions, the group's store formats primarily sell private-label apparel. These formats are Evans, Principles for Women, Dorothy Perkins, and Top Shop (women's wear); and Burton Menswear, Top Man, Hawkshead, Racing Green, and Principles for Men (menswear). In mid-1998 Arcadia acquired Wade Smith, a retailer of designer brands, and launched SU214, a retailer of designer menswear, marking the group's first forays into the designer sector. The company also has ventured into home shopping via catalog marketing and Internet retailing and into overseas markets, with expectations for 200 outlets outside the United Kingdom by the end of 2000.

Founded Under the Burton Brand in the Early 20th Century

It was at the beginning of the 20th century that the foundations of Arcadia Group were laid. In 1900, 15-year-old Meshe David Osinsky joined the thousands of Jews fleeing westward from Russian persecution. Osinsky evidently opened his first store in Holywell Street, Chesterfield, England, in 1904. The merchandise offered for sale consisted of inexpensive ready-made suits for men and boys' wear under the name Burton. Men's suits "noted for hard wear and perfect fit," to quote a contemporary advertisement, were offered from 11 shillings and ninepence, boys' suits "in endless variety" were sold for one shilling and ninepence, caps were sold at one penny, and shirts of emerald green flannel with yellow stripes were sold to Irish farm workers. Advertisements also solicited orders for "bespoke" (made to order) suits. In 1908 a second Burton shop was opened in Mansfield and in 1909 a third shop was opened in Sheffield. Also in 1909 Osinsky, who was to change his name to Montague Burton, married Sophia Marks, daughter of a furniture dealer.

In the same year Osinsky also established the Progress Mills works in Leeds, setting up Elmwood Mills and the headquarters of the firm there in 1910. Between 1910 and the outbreak of World War I, 14 branches of the firm were created, mainly in the industrial towns of the Midlands and the North East. The number of branches had grown to 40 by 1919, including eight shops in Ireland. These were all to be stocked with clothing. There was also the mounting task of meeting the demand for uniforms, which the firm was under contract to supply--all this with a constantly changing labor force as men joined the war effort and were replaced by women. By the end of the war Elmwood Mills occupied five premises in Leeds, and the labor force had grown from 56 in 1914 to 500. Production was divided between civilian needs and contract requirements, which posed a problem. The firm either had to shelve half its productive capacity or expand the number of retail outlets. It chose the latter, and the number of shops grew from 40 in 1919 to 140 by 1922.

Rapidity of growth was accompanied by change in status: the company, Montague Burton Ltd., adopted limited liability in 1917 with a share capital of £5,002 increasing to £47,002 by 1924, all the shares but one--which belonged to Mrs. Burton--being held by Montague Burton. The firm by this time made almost entirely wholesale bespoke clothing, with the customer being measured in the branch shop and his requirements sent for translation into the appropriate garment. The advantage of the wholesale bespoke system to the customer was that he got exactly what he had ordered to suit his size and personal preferences, instead of the approximation he would be likely to get by buying ready-made. The benefits to the producer were not having to finance stocks of ready-made clothing and being able to avoid intermediaries. The success of the system lay in the speed with which the customer's order could be processed. This required organizational ability of a high degree and was of crucial importance in this highly competitive business. To this end, production was centralized at Hudson Road Mills, on a site offering plenty of scope for expansion, the first stage being opened in 1921.

Tremendous Growth Between World Wars I and II

The main force behind the move to the new factory was the growth in retail trade. Whatever the state of the national economy, there was no year between the wars in which the number of Burton shops failed to grow. From 140 in 1922, the number more than doubled to reach 291 by 1929 and doubled again by 1939. The early increase in the number of shops was in the older industrial areas of the country such as West Riding of Yorkshire, Lancashire, the Midlands, and the North East, accounting for 80 percent in 1919, but this had fallen by 1939 to 50 percent. This diversification of outlets was behind the firm's remarkable record. The shops themselves set new standards of excellence, reflected in the expenditure on fixtures and fittings. From 1917 to 1939 the average amount spent on these items rose from £123 to £1,834. The 1925 publication Goodwill in Industry, by J. Foster Fraser, produced to mark the years that the firm had been in business, contained the following description: "Every Montague Burton shop has the same outward appearance, both in its window dressing and in the name of the firm uniformly presented in bronze lettering on the marble. The exterior stonework is always of emerald pearl granite with shafts of Scotch grey granite. The interior fittings of oak and gun-metal quiet and dignified are the same at every branch." This impression of quiet dignity was emphasized by the reception accorded to the customer. Each Burton shop received an instruction manual containing the following advice: "Impress on staff (a) to offer customer a chair and an invitation to be seated (b) to greet customer with a cheerful 'Good morning' entering (or Good evening) (c) to wish the customer a pleasant 'Good day' when departing. The prefix 'Sir' after 'Good morning' or similar conversational courtesies appeals to the average man whether you're intellectual, social, economical superior or inferior. Make your customer feel he is welcome and that you are anxious to please him. Avoid the severe style of the income tax collector and the smooth tongue of the fortune teller. Cultivate the dignified style of the 'Quaker tea blender' which is the happy medium."

The care and attention paid to the running of the branches was matched by that shown to the workforce, and the new factory building at Hudson Road facilitated this. Here it was possible to provide a fully equipped canteen for 2,000, serving a midday meal costing between four and ten pence, together with comprehensive welfare services. The motivation behind this provision was rooted in the belief that productivity and contentment of the workforce were positively related.

When the new canteen was opened by the Princess Royal in 1934 it seated 8,000 workers, indicating the firm's growth. In 1929 the company became a public limited liability company with a capital of £4 million, having been a limited liability company since 1917. Montague Burton was knighted in 1931. For the rest of the 1930s the story was one of uninterrupted expansion. The number of shops had reached 595 by the outbreak of World War II. The success of retailing brought pressure on the departments at Hudson Road that produced the ready-to-wear suits, and there was a shortage of female labor, which Burton's own success had helped to create. At first the labor surpluses of the Yorkshire coalfield area were tapped and female workers were bused in from places such as Castleford and Normanton. This source of labor proved inadequate, however, and the firm sought relief in the blighted cotton towns of Lancashire. Three factories were opened in the 1930s, including a custom-built one at Burtonville on the East Lancashire highway. Between them they employed 6,000 workers in addition to the 10,600 employed at Hudson Road.

The decade witnessed the beginnings of a move away from wholesale bespoke tailoring, which had been the mainstay of the firm's output, to the ready-made suit. According to the Outfitter, March 26, 1938: "Montague Burton's are to make a definite and strenuous effort to popularise the ready to wear lounge suits throughout the British Isles. Some of the larger branches have always carried made-up suits, now a ready-to-wear department is to be part of every shop. For the first time a ready-made lounge suit is illustrated in the general spring catalogue issued from all branches.... The main branch in Tottenham Court Road, London W1 is the largest of its kind in Britain. Over 2,000 garments are always in stock in 250 different fittings."

Change of this kind carried revolutionary implications that were far from complete by the outbreak of World War II. The firm threw itself wholeheartedly into the war effort. The float representing Burton at the London victory parade of June 6, 1946 bore the proud inscription "13,642,169 Garments For The Fighting Services," and the importance attached to the factory by the Germans is illustrated by a map discovered in German archives, pinpointing it as a Luftwaffe target. Wartime shortages of materials, the disruption of the labor force in response to the demands of the armed forces, and clothes rationing continued into peacetime. Not until 1950 did the chairman's annual report to the shareholders refer to improved stocks commensurate with prewar standards. The unfortunate outcome of a policy of buying in stocks of raw material on such a scale in a rising market due to extraneous circumstances was revealed when those prices suddenly fell. In Burton's case it meant writing off stocks to the value of £1 million. This was followed in September 1952 by the sudden death of Sir Montague Burton.

Transformed into Burton Group, 1953--91

Measured in terms of turnover the £19.5 million that the firm achieved in 1953 had grown to almost £42 million by 1964. By 1990 this figure had been eclipsed by a turnover just short of £2 billion. Growth statistics, however impressive, conceal fundamental changes in the structure, organization, and purpose of the firm. By 1991 it had shed all its cloth and clothing manufacturing activities. The Hudson Road factory, which once housed thousands of workers, became a distribution center with the vast floor spaces carved up into smaller rooms. The Lancashire factories were gone, the one at Burtonville was demolished, and the two at Goole and Doncaster, acquired since the war, were vacated. The business became more diversified, ceasing to serve men only, with more than half its sales to women. The shops catered to different sectors of the market and carried a comprehensive stock of clothing. They consisted of Burton Retail, Dorothy Perkins, Top Man, Top Shop, Evans, Debenhams, Principles for Men, and Principles for Women, all together making up Burton Group plc.

The long march to achieve this position started in 1953 when Burton acquired the firm Jackson the Tailor, thereby seeking to strengthen the management by acquiring the services of Sidney and Lionel Jacobson, directors of the company Weaver to Wearer Ltd., who had built a reputation of successful trading and who became directors of Burton in 1953. It was due to them that the firm divested itself of its clothmaking activities. The acquisition of the Peter Robinson shops, which by 1967 had grown in number to 39, predated the arrival of the Jacobsons by six years and heralded the movement of the firm into the women's side of the market. A new departure was the introduction of credit facilities for customers in November 1958 to make the firm more competitive. In 1963 Burton set up in business in France, anticipating Britain's entry into the European Common Market by ten years. This was one strategy open to a firm that had saturated the home market. Ultimately it was a failure, notwithstanding the acquisition of the St. Remy company with 35 shops, which made Burtons one of the largest specialty clothing firms in France and which was finally sold in 1981.

Another venture that the firm tried was mail order. It was announced in 1964 that after much detailed organization and planning, the firm was ready to go ahead with the newly created Burton-by-Post venture. This was unprofitable and was sold in 1970. In spite of these schemes, aimed at diversifying the company's outlets and products, it remained dependent on sales of men's tailored clothing. With the exception of the small chain of women's shops doing business as Peter Robinson and the prestigious general outfitters Browns of Chester, the only women's clothing outlets were the Burton shops, hence the move into the women's trade with the purchase of Evans Outsizes in 1971. Sometimes the search for diversity led the firm in unaccustomed directions, as with the acquisition of Ryman's chain of shops specializing in office equipment, with a separate drawing office. This venture ended in 1981.

Another example of the search for diversity, announced by Ladislas Rice on joining the firm in 1969, was the purchase of Greens Leisure Centre with 41 branches specializing in photographic equipment. This was never a profitable enterprise and was disposed of in 1976. A venture more closely related to Burton's primary business was an attempt to break into the children's market with the establishment of the Orange Hand Shops. This development lasted just four years, and in 1976 the company decided that it could no longer justify further investment in the endeavor as it was unprofitable. More successful was the 1979 acquisition of the Dorothy Perkins chain of women's wear shops that featured mid-range prices.

In January 1972 the chairman's report, having declared the company's intentions to become known as a group in 1969, announced: "Our company is now on the way to becoming a group of specialist retail chains each with a clearly defined market and a distinctive face to the public. ... We intend to maintain and develop our dominant position in the menswear market. However, we shall become less completely dependent on it as our newer retailing activities grow."

In conjunction with this strategy, Burton discontinued manufacturing on grounds of cost. The rationale of the process&mdash′obably the most important in its history--was outlined by Ralph Halpern (later Sir Ralph) in his chairman's report of December 1981. After detailing the reasons why Burton had fallen behind the British clothing retailers in general, he outlined measures to retrieve the situation. First was the curtailing of the company's manufacturing activity. Second was the application to other company chains of retailing methods evolved by the Top Shop sector, and third was the shedding of all the loss-making activities.

Draconian measures saw Burton emerge with its sights set on retail selling with different divisions specializing in different market areas. Two new chains of shops were added: Principles for Women in 1984 and Principles for Men in 1985, specializing in high-quality clothing, and Debenhams' chain of 67 stores and the shops of John Collier were acquired, also in 1985. Debenhams marked another departure in that it was a department store chain offering clothing for the whole family and housewares. The parent company changed its name to Burton Group plc in 1985. Principles for Women and Principles for Men merged to become Principles in 1990. November 1990 saw the retirement of Sir Ralph Halpern, the man who had transformed the firm of Burton almost beyond recognition. Laurence Cooklin, a company veteran, replaced Halpern as chief executive.

Difficulties in the Early 1990s Followed by a Turnaround

An ill-conceived move into property development, coupled with the negative effects of a policy of endless discounting of merchandise, led to declining fortunes for Burton in the early 1990s. The collapse of the U.K. property market left the group with unsalable property and a heavy load of debt. In 1991 Burton laid off 1,600 employees as part of a cost-cutting restructuring and also raised £161 million (US$262.9 million) through a stock offering to reduce debt, but it still posted a loss of £13.4 million (US$21.9 million) for the fiscal year ending in September. Revenues fell 7.1 percent in 1991 to £1.66 billion (US$2.71 billion). In February 1992 Cooklin resigned his position and was succeeded by John Hoerner. An American born in Lincoln, Nebraska, Hoerner was chairman and CEO of the L.S. Ayres division of the U.S.-based May Department Store Company before taking over as chairman and chief executive of Debenhams in April 1987, where he was credited with effecting a turnaround.

Hoerner moved quickly to reverse the entire group's fortunes. About 2,000 jobs were eliminated, including nearly 1,000 at the group's headquarters. All of the group's chains underwent wholesale revamping to reposition them for full price selling rather than the detrimental constant discounting of the past. This was accomplished by carefully selecting the target market for each format, then redesigning the stores and the merchandise. In 1993 Hoerner also launched a program called Townprint, which aimed to ensure that each outlet was located in the right place and properly distanced from each other. Townprint led to a major reorganization of the group's 1,600 stores, calling for the disposal of 380 units, the acquisition of 228 units, and the transfer of 354 units from one Burton Group format to another. By 1995 Burton was well on the road to recovery, posting aftertax profits of £73.8 million on turnover of £2.16 billion.

In July 1996 Burton made its first move into home shopping in decades with the acquisition of Innovations, a direct mail order company, for £44.9 million. Innovations itself was a catalog of gadgets, and this brand was sold to Great Universal Stores in November 1997 for £20 million. Burton retained Innovations' customer databases and the Hawkshead brand clothing catalog. Hawkshead sold outdoor clothing and casualwear for the entire family and, under Burton, began opening up retail shops as well. In October 1996 Burton ventured further into home shopping with the £19 million purchase of Racing Green, whose men's and women's apparel lines featured the "smart-casual" look. There were already a few Racing Green retail outlets, and the brand's retail side was significantly expanded soon after the acquisition by Burton. The group's home shopping endeavors widened with the fall 1997 launch of sales over the Internet. By 1999 the group claimed to have the largest Internet site in Europe. In December 1997 Burton formed an alliance with Littlewoods, the catalog and football pools group, to create a joint venture, Dial Home Shopping Ltd. The venture was charged with producing catalogs for all of the Burton brands.

Spun Off Debenhams, Became Arcadia in Early 1998

In July 1997 Burton Group announced that it would spin off the Debenhams department store chain to concentrate solely on apparel retailing. In January 1998 the demerger was consummated; simultaneous with this development, the group changed its name to Arcadia Group plc. Hoerner told the Financial Times: "This name has a clear feel to it that we believe is appropriate to our future in stores, home shopping and the Internet--both in the UK and other countries--a real 'arcade' of brands." The change also meant that the group name would no longer be associated with only one of the company's many brands, even if that brand was the one on which the group was founded.

In July 1998 Arcadia added another brand to its collection through the purchase of Wade Smith for £17.3 million (US$28.7 million) in cash and £3.3 million (US$5.5 million) in debt. This acquisition marked another first for the group, as its existing formats all centered around private-label merchandise. Wade Smith, based in Liverpool, specialized in designer and branded sportswear. Arcadia was particularly interested in expanding the Wade Smith Jnr. subformat, which specialized in branded sportswear for customers aged 2 to 12. There were three Wade Smith Jnr. outlets at the time of the purchase, and Arcadia planned to expand it into a chain of up to 30 stores. In August 1998 the group launched a new format, SU214, selling branded menswear and marking an additional commitment to the designer apparel sector.

For the fiscal year ending in September 1998, Arcadia Group posted strong results despite the spinoff of Debenhams. When considering only continuing operations, operating profits were £80.6 million (US$125.1 million) on revenues of £1.47 billion (US$2.28 billion). Arcadia had more than 2,000 outlets in the United Kingdom by 1999. In addition to seeking growth through the acquisition and launching of new formats and the forays into home shopping, the group intended to increase its overseas presence from the 57 outlets in 11 countries it had in late 1998 to 200 by the end of 2000. The Middle East and Europe were the two major areas of Arcadia overseas operation, and its European presence was slated to grow following the 1998 signing of a franchise deal with a partner for Iceland and Scandinavia.

Principal Subsidiaries: Arcadia Group Brands Ltd.; Arcadia Group Design & Development Ltd.; Arcadia Group Multiples (Ireland) Ltd.; Burton Retail Ltd.; Dorothy Perkins Retail Ltd.; Evans Ltd.; Hawkshead Retail Ltd.; Principles Retail Ltd.; Racing Green Ltd.; Redcastle Investments Ltd.; Redcastle Ltd.; Top Shop/Top Man Ltd.; Wade Smith Ltd.

Further Reading:

• "American Is New Chief of a Retailer in Britain," New York Times, February 14, 1992, p. D4.
• Brown-Humes, Christopher, "Burton Moves to Home Shopping with Innovations," Financial Times, July 20, 1996, p. 20.
• Buckley, Neil, "Burton More Than Doubles As It Breaks Off from Discounting," Financial Times, November 10, 1995, p. 17.
• ------, "Pulling Its Socks Up," Financial Times, November 8, 1995, p. 19.
• Edgecliffe-Johnson, Andrew, "Burton to Change Name to Arcadia," Financial Times, October 13, 1997, p. 29.
• ------, "Littlewoods Joins Burton in £15m Share of Brands," Financial Times, December 13, 1997, p. 18.
• Fallon, James, "Hoerner Using U.S. Savvy to Revamp UK's Burton," Daily News Record, January 13, 1993, p. 12.
• ------, "UK's Arcadia Group Buys Wade Smith Retail Chain," Daily News Record, July 6, 1998, p. 22.
• ------, "UK's Burton Joins Web Brigade," Women's Wear Daily, December 6, 1996, p. 12.
• Fraser, J. Foster, Goodwill in Industry, Leeds: Burton, 1925.
• Hollinger, Peggy, "Arcadia Forced to Cut Prices by Competition," Financial Times, January 22, 1999, p. 18.
• ------, "Burton Strengthens Mail-Order Side," Financial Times, October 22, 1996, p. 20.
• ------, "Debenhams May Be Worth £1.5bn in Burton Demerger," Financial Times, July 9, 1997, p. 1.
• ------, "Hoerner Looking tTo Cure All the Runny Noses," Financial Times, May 17, 1997, p. 20.
• ------, "Hoerner's Excitement Leaves Market Anxious," Financial Times, July 9, 1997, p. 16.
• Redmayne, Ronald, Ideals in Industry, Leeds: Burton, 1951.
• Sigsworth, Eric M., Montague Burton the Tailor of Taste, Manchester: Manchester University Press, 1990.

Source: International Directory of Company Histories, Vol. 28. St. James Press, 1999.

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