Factory Shop bucks the trend as shoppers flock to its stores

DISCOUNTER The Original Factory Shop bucked the trend of dismal performance among retailers with surging quarterly sales and profits and pledged to continue investing in UK high streets.

The Northern-based retailer, which sells cut-price goods ranging from sport shoes to duvets at 180 shops across the UK, said sales at stores open for more than a year were up 5.5 per cent in the three months to the start of July.

Total sales grew 12.5 per cent and underlying earnings were up more than 20 per cent – although no sums were disclosed.

Sign up to our Business newsletter

However, The Original Factory Shop (TOFS) admitted its expansion continues to be tempered by the bleak consumer climate.

It plans to open 15 new stores this year, up from 11 last year but down from 35 in 2010.

“We’re not doing that because the (economic) climate is quite unpredictable,” said chief executive Angela Spindler.

“Anybody who’s not made some adjustments based on the climate would be very brave.

“We are swimming upstream strategically and bucking the trend by opening stores and trading strongly on Britain’s small town high streets. We look forward to continued momentum and growth in 2012.”

Ms Spindler, a former senior executive at Asda and previous managing director of Debenhams, said the chain’s performance was in stark contrast with the woes of its much bigger rival Marks & Spencer.

“A good barometer of the sector is Marks & Spencer – 6.8 per cent down in general merchandise (GM),” she said.

The UK’s biggest clothing retailer, M&S last week said sales at UK stores open more than a year fell 2.8 per cent in the 13 weeks to June 30 – the firm’s biggest quarterly drop in sales since the third quarter of 2008/09.

That was led by the steep fall in GM – clothing, footwear and homewear – while food sales were up 0.6 per cent.

Burnley-based TOFS, which opened its first store in Keighley in 1969, was established as an outlet for Peter Black’s, selling factory seconds, including some M&S lines.

Backed by private equity firm Duke Street Capital, it has 15 stores in Yorkshire, at locations including Ilkley, York and Otley. The chain has opened eight of its 15 planned new stores this year, including one in Hornsea, East Yorkshire.

TOFS employs 2,600 staff and targets towns with a population of around 15,000. It has a medium-term target of 450 stores and a long-term aim of 600 stores.

Ms Spindler said the chain’s success was due to a combination of “what we sell, where we are and our value for money”.

“We are very relevant to how people are thinking and will continue to think for the foreseeable future,” she said. “It’s unique. No-one is doing what we are doing.”

TOFS sells brands including Adidas, Dolce & Gabbana, DKNY and Black & Decker.

Ms Spindler said while others are retreating from the high street in the face of fierce online competition, TOFS has much more scope for growth.

“Many retailers are articulating the same story – they only want prime locations or major malls and the rest of the population can buy into their offer online.

“That’s not what we’re doing.

“I absolutely believe there will always be a place for shopping and being able to get great value for money and choice on your local high street.”

The chain’s growing online offer “complements” its in-store offer – selling goods such as beds and washing machines which cannot be bought in-store. The website booked sales of £2m in 2011. TOFS also recently launched an in-store catalogue, allowing customers to place online orders in store.

“It’s really picking up more of the spend of our existing customers,” said Ms Spindler.

She added the business is not seeing any regional variations in trading.

“North, South, East or West, affluent or less affluent, these are not the factors that really correlate with success for us,” she said.

“It’s very much about picking the right town.”

TOFS reported underlying earnings of £10.4m on turnover of £177m in the year to the end of March 2012. Like-for-like sales grew 1.5 per cent and total sales were up 11.7 per cent.

Ms Spindler denied TOFS is being touted for sale by Duke Street.

“We are private equity-backed and therefore at some point the business will be up for sale. We are not at the moment and we have no immediate plans to review that.”

March of the smaller players

Discounters appear to be seizing market share from the Big Four supermarkets, reflecting an increasingly polarised grocery market.

Latest figures from retail consultancy Kantar Worldpanel show German discounters Lidl and Aldi both booked double digit increases in sales in the 12 weeks to June 10, versus a year earlier.

Aldi and Lidl both reported market shares of 2.8 per cent. Aldi’s was up from 2.3 per cent a year earlier, thanks to a 24.7 per cent increase in sales. Lidl’s market share grew from 2.6 per cent a year earlier, with an 11.1 per cent increase in sales.

Market leader Tesco saw its market share fall to 31 per cent and Morrisons’ fell to 11.8 per cent from 12.2 per cent in 2011.