Evan Davis: So Peter let’s talk a little about the relationship between retailers and property. Traditionally I think the public would think there’s a shop, there’s the shopkeeper and the shopkeeper owns the property and it all works very nice and simply, but of course it’s much more complicated. At SuperGroup, with your Superdry brand, do you own any of your stores?
Peter Bamford: I don’t think we do. In the
Evan Davis: Take us through the advantages or disadvantages of actually owning your store. Why wouldn’t you own your store?
Peter Bamford: I think that less retailers now own their stores than would have been the case twenty, thirty years ago, and I think the first issue is that retailers have increasingly focused on running shops. And for example many retailers now outsource big elements of their distribution and warehousing, outsource elements of their IT, they're focused on their core business, so I think the critical issue is that if you own your own store you have to make a large capital investment in buying the property and then you expose yourself to another set of risks and opportunities around the property market, and that might work for you but it might work against you.
So most retailers I think have ended up saying let’s just focus on, we’re experts in running shops, let’s focus on doing that, let others take the property risk and opportunity. I think the other issue for a company like SuperGroup is that most of our stores are of a size where we are part of a building or a small part of a shopping centre, whereas if you take the other end of the extreme, if you're a hotel, you tend to be the building, and therefore it might make more sense to own the building and develop the building as well as have the hotel.
Evan Davis: If you were the really star tenant though of the shopping centre, you might say I want a bit of skin in the game here, I want to own part of the shopping centre, because I'm adding value to all the other shops. If the customers are coming to my store, the other shops are really all on my back, you would perhaps then want to be a bit of a property developer as well maybe.
Peter Bamford: You might do, but there’s another formula that then works, which is that, and it’s worked very favourably for SuperGroup, is because we are in demand, many of our sites that we've taken, the landlord has paid us to go in the shopping centre. So they're paying us a premium, which on many occasions can cover, or almost cover, the capital cost of us fitting out the store. So that reduces our investment. That’s certainly one of the experiences we've had.
Evan Davis: So if you are a really attractive tenant, you clearly get better terms because…
Peter Bamford: Absolutely, if you're in demand, if you have a brand they want, then they will give you, in one form or another, terms which will be attractive.
Evan Davis: Let’s just talk about the typical lease. Do you treat a lease, do you think of it as a liability on your balance sheet? Is it like borrowing money, because you’ve committed to paying it even if the shop is selling almost nothing presumably?
Peter Bamford: Yeah, no, we are very conscious of leases and the impact on the cost base of the business. Because sometimes you will get rent free periods for three months, six months, if you're lucky for twelve months, and it’s very important in a growing business where you're opening, let’s say as we are, twenty stores a year, to be aware that whilst some of these things may not be hitting you in the immediate term, that they do lie down the road. It’s very important to look at the full lease commitment and understand what that is.
Evan Davis: And, as I understand it, you will sign a lease, it’ll be for more than five years, it’ll be sometimes quite a long lease, but these leases are, you can sublease, if you're finding a store doesn’t work, you can let it to somebody else?
Peter Bamford: Yeah, if it’s in a good location, good site, there will be opportunities, and we pick up sites that way too.
Evan Davis: Right. Peter Bamford, thank you very much indeed.
Peter Bamford: Thank you.
- Evan Davis was talking to Peter Bamford after a recording of The Bottom Line
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