Blackfriar: Bonmarche gets it right after sizing up a niche market

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Shares in Bonmarche, the value fashion chain that focuses on the over 50s, leapt 10 per cent on their AIM debut yesterday.

The Wakefield-based company priced the shares at 200p and they closed yesterday at 220.5p – a healthy jump for canny investors, many of who have contacted the Yorkshire Post to find out more about the company after we wrote about them last week.

At first sight another fashion retailer on the block hardly seems like an attractive investment proposition.

Market leader Marks & Spencer is struggling with its clothing sales, but Bonmarche has taken a very different stance to M&S.

Part of M&S’s problem is it tries to appeal to all women – from teenagers to octogenarians, from wealthy to cash-strapped, from high fashion to mumsy.

In contrast, Bonmarche has set its stall out very clearly – cheap clothing for larger ladies who are over 50.

While that may not sound too appealing to the rest of us, Bonmarche is more aspirational than that summary implies.

It sells stylish jumpers for £18, figure-hugging dresses for £28 and has an exclusive designer collection by David Emanuel, which is a lot nicer than the wedding dress confection he dreamt up for Princess Diana.

Bonmarche’s brand ambassador is sassy actress and TV presenter Nadia Sawalha, 49, who recently modelled the retailer’s swimwear in Best Magazine.

The feature showcased Bonmarche’s summer collection and Prima magazine has also praised their clothing.

The retailer was awarded ‘Britain’s Best Women’s Clothing Retailer’ at the Verdict Research Awards 2012.

Bonmarche was established in 1982 by two brothers who began their business on market stalls before opening their first store in Doncaster.

The business expanded very quickly to a portfolio of over 200 stores before being acquired in 2002 by Peacocks, a value fashion retailer targeting the over-25 female shopper.

As a subsidiary of Peacocks, the business grew rapidly and was operating from over 390 stores by January 2012 before Peacocks ran into financial difficulties.

Saddled with £240m of debt, Peacocks went into administration and Bonmarche was snapped up by a private equity firm.

After being slimmed down to 265 stores, the group now has a customer database of 6.5 million members, a website, mail order catalogues, a telephone order service and also sells through a TV shopping channel.

In the year to March 30, the group generated healthy earnings of £9.1m on revenue of £146.8m.

Its clothes are mainly own-brand and are mostly sold through its own stores, but it also has tie-ups with 1,000 care homes, where staff hold sales events on the premises and it has some interesting expansion ideas such as selling clothes on cruise ships and in garden centres.

The UK womenswear clothing market was estimated to be worth £21.9bn in 2013 by Verdict and it is forecast to grow by 15.4 per cent by 2017. Within this market, the value segment is expected to grow at a faster rate and take a greater market share.

Analyst Mike Savage, at Killik & Co, believes the company is a good investment.

“Bonmarche’s shares provide investors with exposure to the continued growth in value retail, which has grown significantly ahead of the broader clothing retail market in recent times, as well as the ageing demographic of the UK population, giving rise to a larger potential client base. A 50 per cent rise in the number of over 65s is forecast in the next 20 years,” he said.

“Despite these favourable secular drivers, it seems that competition in value clothing for women over 50 is somewhat fragmented and less intense than seen in other strata of the clothing retail industry.

“In summary, we view Bonmarche as an attractively valued retailer that has a sound balance sheet, a credible and relatively low-risk short-term growth strategy, all underpinned by several longer-term secular drivers.”

Bonmarche describes itself as the UK’s largest value retailer for ladies plus size clothes (ranging from size 12 to 32) and as the average age of the UK population increases, it reckons it’s well placed to take advantage of its strong market position, given the limited number of rivals who focus on value fashion for the over 50s.

In fact it can cash in on all the current trends – women are getting bigger, Britain has an ageing population and after five years of economic gloom, value retailing is no longer a dirty word.