King's strategy for store wars

JOHN King has made a special effort to dress up. Instead of his usual £65 suit, the chief executive of clothing retailer Matalan is wearing an £80 soft wool and cashmere number. King says: 'It's only because I forgot to wash the other one.' He adds: 'This would be £200 in Marks & Spencer.'

This is typical of King, an unassuming man who does not stand on ceremony. Unlike some of his rivals, the 42-year-old would not dream of wearing a £1,000 Savile Row suit while extolling the benefits of Matalan's cut-price clothes.

He admits that he is 'not really one for designer labels anyway', having had a modest upbringing in Harrow, north west London. His Irish parents sent him to the local Roman Catholic grammar school. 'I'm not extravagant, that's not in my nature,' he says. 'We didn't have much money when I grew up. We were not thrifty, just sensible.'

The big question being asked in the City is whether King is his own man. Some fear he may be too much in the shadow of chairman and founder John Hargreaves whose family owns a 52% stake worth £445m.

These worries have not been helped by the fact that King is the company's third chief executive in four years, taking the job after the abrupt departures of his two predecessors, Angus Monro and Paul Mason.

But King says suggestions that Hargreaves runs Matalan as a fiefdom are wide of the mark. He describes Hargreaves as a 'lovely guy' and 'the most successful businessman I know'.

Down-at-heel

HARGREAVES, a self-made tycoon who cut his teeth on a market stall in Liverpool, works three days a week and lives in Monaco the rest of the time.

His son Jamey, who recently broke up with girlfriend Tara Palmer-Tomkinson, works part-time as a consultant on the men's ranges. Elder brother Jason is the sourcing director.

Matalan's head office is in down-at-heel Skelmersdale, Lancashire, and its shopping 'experience' is a long way from It-girl glamour. It consists of walking around a spartan steel warehouse, filled with racks of clothing, kitchenware and ornaments. Matalan avoids spending cash on anything that will not be carried out of the door in a customer's shopping bag.

King tries patiently to explain to me that 'value for money' is not synonymous with 'cheap'.

It is a pretty hard sell, because as a single woman living in central London's retail heaven, I am struggling to understand why someone would travel to a Matalan superstore on a dreary out-of-town retail park.

Since becoming chief executive in March last year, King has been trying to tweak its core concept. He does not have a choice. Once the darling of the sector, the company is in danger of becoming a white elephant.

When Hargreaves set up the firm in 1985, he started a clothing revolution. Shoppers marvelled at the cheap prices, driven by shrewd sourcing from the Far East. But rivals have caught on and £5 shirts can be bought in Asda, Tesco and any number of cut-price outlets.

As a consequence Matalan's profits have slumped. Underlying sales, which grew 22% in 2001, fell 6.5% last year.

The retailer desperately needs to win back the faith of the City. The shares are trading at 200 3/4p, having floated at 235p in 1998. They peaked at 800p in 2000.

Analysts fear that Hargreaves is getting fed up and is ready to sell out to Asda or a US retailer such as Target.

King says merely: 'There will always be speculation.' He adds: 'John is absolutely committed to the recovery. There is a lot more this business can do.'

'Tough drug'

HE PLANS to beef up the board by appointing new non- executives and possibly an independent deputy chairman. But improving the health of the business is the top priority.

'I'm totally a fan of corporate governance...but I wouldn't get any prizes for saying, I've changed the non-executives and oh, by the way, trading has not improved.'

King describes Matalan's earlier rapid expansion as 'a tough drug to get off ', but he reckons the golden days could never have lasted. As well as low prices, customers are demanding a better shopping environment, high-quality fabrics and exciting new designs.

'Customers are far more savvy about the product,' he says. 'People still have their key designer pieces such as Diesel jeans or Jimmy Choo shoes, but they will wear it with a £3 top from Matalan or a £4 vest from Tesco.'

King is slightly nervous. He first agreed to an interview back in autumn 2003, but it was called off because he had to issue a shock profits warning.

His job since then has not been easy. 'It has been an interesting journey,' he says wryly.

This summer has been difficult for retailers, but his decision to speak publicly - despite going to hospital with suspected pleurisy earlier in the week - indicates that there will not be another profits warning.

'I think the market will continue to be tough, but we are trading in line with where we want to be,' he says.

Having upgraded IT systems, improved availability and stabilised sales, King says: 'I'm confident that we have run to ground all of our issues. The decisions that we have taken will start to bear fruit.'

Lure of brands

HIS objective is to grow underlying sales at a more normal 3%, rather than returning to the high-growth era. He aims to get profits back to their £117m peak 'over the next couple of years' after they halved in 2003 to £60.7m.

There should be plenty of growth to go for, if Matalan can win back customers. In the US, 'value' players make up 35% of the retail sector, compared to just 18% in the UK.

The hardest bit is to persuade customers to drive to a Matalan store. Unlike supermarkets which see shoppers every week, customers tend to visit a Matalan just four times a year. King hopes to lure them with branded goods and multibuy promotions.

'If it was all about price we'd all be shopping on the market stalls,' he says. 'People don't come to us for £4 jeans. They come for bootcut jeans at £13 that would cost £25 in the High Street.'

Customers on average spend only £20 a visit. King needs to make them spend more. Matalan's unique concept means that all shoppers must pay £1 and sign up to its database before they can buy anything. They are then bombarded with monthly mail shots.

Within three years, all 181 stores will have been refurbished. It is a large project for King, a relative youngster in the retail industry.

When he joined Matalan in 2002, he was hired to sort out its Lee Cooper jeans business, so it was a big leap to chief executive, although he has Hargreaves on hand to help.

'Lowest moment'

HE says: 'There were some concerns about whether or not I had enough retail skills. But retail is in my blood. I left school, went straight on to the shop floor at Sainsbury, worked there for five years and then went to M&S.'

By 26, King had become managing director of Goulds, which supplied cleaning goods and 'printed bin liners that matched your crockery'.

Later, as a director of clothes firm Baird, he was involved in laying off 6,500 staff when the company was axed as a supplier to M&S. 'That was probably the lowest moment of my career,' he says. After that he spent several years running lingerie firms in the US.

His return to the UK appears to have been linked to a divorce that he is reluctant to discuss. He has a new girlfriend and lives in the country 'with bats and badgers' near Chester. 'I'm very happy - that's as much as I'll say,' he says, looking distinctly uncomfortable.

King is a great fan of Matalan's Jeff Banks underwear, but admits his girlfriend has yet to try out the ladies' lingerie. She is from overseas and has never been to a Matalan. But King insists: 'She's going to have that experience this weekend.'

If she wants to stay in his good books, she had better embark on a wardrobe overhaul.