The Interview: Luke Kingsnorth, CEO, Charles Tyrwhitt
While Charles Tyrwhitt made an £11m cash profit in the year pre-pandemic, in its last year accounts – which had six months of pandemic trading – CEO Luke Kingsnorth said the company “made a small loss.”
Although being a largely formalwear-focused business, particularly formal shirts, also being a largely online business enabled Charles Tyrwhitt to react quickly to its new customers’ shopping needs and pivot the offer to be more casualwear driven. So much so, that the business is now more like 50/50 casualwear to formal. Kingsnorth remains optimistic of a bricks and mortar bounce-back, as well as newfound interest in the retailer’s formal offer going forward.
How long have you been Charles Tyrwhitt’s CEO?
I’ve been CEO for two years. I was previously running our US operation over in New York, where I was based for three years. Then prior to that I was the Ecommerce and Marketing Director at Charles Tyrwhitt, so I’ve been with the company for 10 years now.
How challenging has the last year been for a formalwear focused business?
It’s been quite challenging as a large portion of our sales were formal shirts. With no-one going to their offices, it’s certainly made things a little trickier. We had a tough start (to trading when the pandemic struck), but things have got better over the last six months or so.
What happened to your bid to takeover rivals T.M. Lewin in May last year?
These things often come up in the course of business, and we were interested, although it didn’t come to anything.
How have you fared better than T.M. Lewin and Pink Shirtmaker?
Pre-pandemic we had the benefit of being a 70% direct to consumer online business, so we relied less on bricks and mortar stores than our competition both in the UK and the US. When our stores shut, it wasn’t such a big impact on us as it was for others. We’ve historically always been a direct-to-consumer business, as it was originally founded by Nick Wheeler in 1986 as a catalogue business, and we operated online very early on – from 1997.
When the pandemic struck, we also reacted a lot quicker and pivoted to our more casual offer, such as polos, casual shirts and Merino knitwear – all the things that people would still wear while working from home. We were able to quickly shift our efforts and focus on to that part of our business, which has done very well over the last year, while the formal side has obviously been tougher.
How many Charles Tyrwhitt stores have you had to permanently close during the pandemic?
We had 42 stores pre-pandemic in the UK and US and we’ve closed three stores that came up for lease renewal which we haven’t continued with. They were outlet malls in York and east Midlands, as well as one on the outskirts of Chicago. We couldn’t see a profitable way to keep them open post-pandemic. We’ve had other stores that have come up for lease renewal that have been renewed. We now have 11 stores in the US, including four in Manhattan.
What are your best performing stores in the UK?
The Jermyn Street flagship, which was opened in the 1990’s, is our best performing store. We didn’t really open that many stores until we got in to the 2000’s. After Jermyn Street, Regent Street is a good store for us, and our stores in the City usually do well for us. Especially in Canary Wharf and on Cheapside. City centres are usually our best stores for sales per square foot.
Do you think the City of London will properly reawaken after such long periods of being dead due to the pandemic?
I certainly hope so! The City will definitely reawaken from where it is now, because it’s completely dead. I think it will build up over the summer, though I don’t think it will go back to 2019 levels any time soon, and we’re not expecting that. With the advent of hybrid working, and people working from home much more than they did pre-pandemic, I think a chunk of that will stick, though I expect cities in the UK to have much more life in them this summer than they did in summer 2020. Working from home definitely has its benefits, but working in an office also has its benefits, so it’s a question of how to best combine the two post-pandemic. Three days in the office and a couple of days at home might be the ‘new norm.’
How many Charles Tyrwhitt stores are set to reopen in the UK on 12 April, 2021?
All of the remaining stores will open on 12 April, or a few days afterwards – once we get retail teams back in place. We don’t see any more store closures on the horizon in the short-term. As I said, we’ve had some leases come up for renewal over the pandemic and, where we’ve been able to renegotiate with landlords, we’ve signed extensions to those leases. We’ve got a few more lease renewals coming up over the next 12 months, and we’ll have conversations with the landlords. If we can reach an agreement that means we can see a profitable future for a store then we will sign an extension, but if we can’t then we won’t, but I’m reasonably confident – having already had some conversations with landlords.
How badly has your suits business been hit?
Suits and ties are probably the categories that have been the hardest hit. Who wears a suit for a Zoom call? Whereas, a lot of people do still wear a smart shirt for a Zoom meeting. I’d say our suit sales halved throughout the pandemic, but we still sold a fair number of suits which is quite surprising. However, luckily perhaps, suits are a smaller part of our business, unlike some of our competitors. Our retail business is obviously a lot more suit-focused than our online business. Pre-pandemic, 70% of our business was formalwear, such as smart shirts (approximately 40%), suits and ties, while 30% was casual. We’re now running at 50/50 casual to smart.
How else have you pivoted your business?
We’ve been pretty reactive to the changing of customer behaviour, even launching face masks. We also aggressively changed our marketing more towards what you wear working from home, more casual shirts, Merino knitwear, jersey and polo shirts. We had those products already, but we just turned the marketing focus on to those areas – from April 2020, and we’ve kept it the focus ever since. If you look at our homepage today, it has a completely different feel to it to what it would have done pre-pandemic. It shines a light on our more casual areas much more, and that’s proved very successful. We also launched a loungewear range towards the end of 2020, and the start of 2021, including smart joggers, sweatshirts, Merino hoodies and long-sleeved jersey polos. We identified quite quickly that the pandemic wasn’t going to be over in a matter of weeks, so therefore we needed to adapt our product offering accordingly and look at where the gaps were. We had to act quickly to develop the product, source suppliers and get it in to sell. We’re now chasing new stock in those areas because we sold out of a number of those lines in a matter of weeks. The beauty of our business is that we’ve always had a very loyal and engaged customer base, so actually we’ve just adapted to their changing clothing needs. Where they were maybe wearing a navy blue suit and a white shirt in to work, or a blazer and nice shirt and pair of trousers, they’ve just taken the formality down a couple of notches – wearing a few more casual open-neck shirts and jersey pieces. We adapted to that, which meant we fared better than some of our competitors.
What else are you now looking to add to your offer?
We’re expanding our nightwear offer, which will go live in the next couple of weeks, and we’ve expanded our casual shirts and range of polos. We’ve also looked in to expanding other areas which have sold reasonably well during the pandemic, such as more casual trousers.
What sort of shape is the business in financially now?
We went in to the pandemic as a very financially stable business, which helped us. We saw demand drop, but it meant we could manage that. We’ve had to tighten our belts, as many retail businesses have had to, but we foresee that through 2021 we’ll grow back strongly as we hold on to the casual business that we gained over the last 12 months, and hopefully add back on to that the formal business as people drift back in to their offices. We see a positive, financially stable future, and we’re looking to grow over the next 12-24 months.
How many redundancies have you had to make during this period?
We had to make a number, not a huge amount but not an insignificant amount - in the region of 250 redundancies. That was at the end of last summer. We haven’t made any more since that, and we don’t feel that we need to. We had about 1,200 employees pre-pandemic.
Have you had much in the way of government support and support from your landlords?
Yes, the business rates relief was welcomed, and we’ve utilised the furlough scheme for staff when our stores have been closed, to be sure we keep them and we’re ready to get those people back when we reopen stores. With regards to landlords, I feel like we’ve had very constructive conversations, and we have largely met at a place that has helped both parties. We’ve paid some rent, and they’ve given us some rent relief. Therefore, we’ve shared the pain of the stores being shut for six of the last 12 months.
With so many businesses having struggled or gone altogether, and the high street decimated, do you see there may actually be opportunity to open more stores?
Quite possibly. We have our ears and eyes open to those sorts of opportunities. A number of our key competitors have closed stores on both sides of the Atlantic, as said before, T.M. Lewin and Pink Shirtmakers here, but also Brooks Brothers went through a bankruptcy procedure in the US, and that is our biggest market. If there are opportunities out there, then we are ready to take them.
How has ecommerce trade to the EU been for you post-Brexit?
Our third biggest market is Germany, and we have a reasonable size business in France (also with one store in Paris), so we were watching with great interest as to what the Brexit deal would be. The demand side has been fine, but there’s a much greater cost and administrative burden getting products from Europe in to the UK, and vice versa. I don’t think that will change, though there may be some improvements as systems bed in. Deliveries will move more smoothly in time, but I don’t see the costs changing. In which case, it will still be less profitable for us to do business in Europe than it was pre-Brexit.
Do you think formalwear will bounce-back?
I think we will see a bounce, especially when events are back on, and people can once again dress up and go to the races and things like that. Also, all of the postponed weddings will no doubt cause a bounce, but even people going back to the office will have an effect, as there will be that novelty of getting a bit dressed up again – even if it’s only a couple of times a week. People might also need different sizes to before, as they may have put on a few lockdown pounds, or gone the other way and used the time to get fit and lose a few pounds. So, there might be a bit of resizing going on as well!
With the Six Nations 2021 recently finished how has the Tyrwhitt Supporter Collection for England Rugby received?
It’s been very well received indeed. We dropped part one of that in October, 2020, around the autumn internationals, and it was a good time to launch that new partnership, which is a four-year deal with England Rugby. It sold very well, with some great gifting items. Also, people who couldn’t go to the games could show their support from the sofa wearing the products. There’s casual shirting, jersey polos, knitwear, socks and boxer shorts, as well as an England blazer and more formal shirting too. We’ve pushed it through our social channels, as have England Rugby, and there’s an interview with Charles Tyrwhitt’s founder, Nick Wheeler, and England’s head coach, Eddie Jones, on our website at the moment.
We’ve more recently dropped part two, which is more linked with the 150th anniversary of the Rugby Football Union (RFU) and the first international match between England and Scotland. There’s a much more heritage feel to it. Again, it’s gone very well as it’s a good partnership for us. Our customer base is very much a rugby-supporting one. There’s a lot of overlaps between rugby and our customers, and we’ve seen that in our response to the ranges. Eddie Jones has been wearing our gear for the last six months but, unfortunately, with it not being normal times, we’ve not had the chance to get with the players so they can be kitted out too just yet. We look forward to doing that this summer. We’ve done a ‘business casual’ range – blazers, chinos and shirts, also jersey polos and so on for travelling to and from matches, and there’s a suiting line for more formal events when they are back on.