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International Journal of Retail & Distr ibution ManagementA. Goldberg & Sons Plc

John Pal

Article informat ion:To cite this document:John Pal, (1993),"A. Goldberg & Sons Plc", International Journal of Retail & Distribution Management, Vol. 21 Iss 3 pp.Permanent link to this document:http://dx.doi.org/10.1108/09590559310036041

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VOLUME 21 NUMBER 3

1993

C A S E S T U D Y

1

A . G o l d b e r g S o n s p l c

ohn Pal

The Manchester Metropolitan University, UK

INTRODUCTION AND BRIEF HISTORY

The 1980s saw many changes in the British

retail sector and a significant, if not major,

player was the Scottish-based company of A.

Goldberg & Sons (AGS). This case study

attempts to draw out the salient factors at

work through the late 1970s and 1980s that

saw AGS initially succeed, but finally fail.

By the mid-1980s AGS was one of only

three Scottish-based retailers still quoted on

the Stock Exchange. Founded in 1908, it was

a quoted company from 1938 and had always

had a member of the Goldberg family at its

head. The Goldberg story has the hallmarks

of many fashion companies — founded by a

Lithuanian Jew, buying bales of cloth and

making it up into piece-goods for sale to

wholesalers, through to the creation of a

135-store nationwide fashion business by the

mid-1980s.

The founder of the company, Abraham

Goldberg, was Chairman from 1908 to 1934,

when he handed power to his two sons,

Ephraim and Michael. Together they brought

the company to the stock market and saw the

development of the business from the one

department store in Glasgow to the building,

by in-house contractors, of the Edinburgh

department store and the beginnings of a

small department store chain in central

Scotland. From 1970 to 1974 stores were

opened in Falkirk, Ayr, Paisley, Kirkcaldy,

Motherwell, Dundee, Kilmarnock, Airdrie,

Dunfermline, East Kilbride and Greenock,

with an average salesfloor space of 7,500 sq.

ft. These sold a range of family fashions,

household goods and electrical items. They

were scaled-down versions of the main

Glasgow department store.

From 1974 onwards Mark Goldberg,

grandson of Abraham, took the position of

Chairman. At that time AGS was the only

Scottish public company with a woman

director. In the mid-1970s AGS became the

first retailer in Europe to introduce a

comprehensive electronic point of sale (EPoS)

system (an IBM system that was in place

until 1987). Until that time all sales

transactions were recorded in day-books, an

operation which involved having 500 book

keepers. Not only was the process costly in

terms of people employed, it also created

large queues in the stores. But the company

took its time in choosing its new system.

EPOS: AN INNOVATION

A visit to the USA by some of the senior

executives included discussions with Nat

Solomon of the National Retailers Merchant

Association. This visit was seen to be a

critical one in that the company was seeking

a survival strategy due to the increasing costs

of the cash-taking system and declining

profits.

Solomon's advice was to wait for IBM to

develop a system. Other companies offering

cash-taking equipment included Singer.

However, Singer's system was an electro

mechanical one while IBM were developing a

computerized one. IBM were instrumental in

defining the needs of the AGS business and

the successful installation enabled IBM to

enter the European market. At a stroke the

labour costs went down and queues in the

stores disappeared, and it represented an

innovative and opportunistic solution to a

serious business problem.

EXPANSION

These changes signalled a move towards

reassessing the business generally and in 1979

the company launched Wrygges, a chain of

young fashion stores targeted at the 15-24

year old female. The late 1970s saw a one for

three rights issue to fund this development,

together with the expansion of the Goldberg

International Journal of Retail & Distribution Management, Vol. 21

o 3, 1993, pp. 5-14, MCB University Press, 0959-0552

© J. Pal 1993.

5



I N T E R N A T I O N A L J O U R N A L

O F R E T A I L &

D I S T R I B U T I O N M A N A G E M E N T

department store chain with another three

units (two in Scotland, and the first venture

in England at Blackpool).

LIFESTYLE RETAILING

The choice of Blackpool at first sight seems

a strange one. Company folklore had it that

the seaside resort was chosen because of the

influx of Glasgow and Edinburgh residents

for their annual fortnight's holiday.

Nevertheless, the company was again to show

its innovative retail approach. Enlisting the

help of consultants from the UK and Carol

Farmer of the US company, The Limited, a

lifestyle approach to merchandising was

adopted. Some of the segments identified

were y oun g, sophisticated , assu red and

reassured . Backed up by market research

and consumer panels, the Blackpool store is

believed by the author to be one of the first

British attempts at lifestyle retailing.

The directors of the time were, however,

disappointed with the Blackpool store. They

are quoted in the Harvard case studies[l,2] as

saying that the new store did not meet the

predicted sales volumes. One of the reasons

articulated by a number of the seminar

executives was that the use of generalist

buying teams meant that the buyers did not

have a focused approach to the segments

identified. By 1981 the turnover from the

stores was feeling the impact of the recession.

Turnover figures 1974-90 are given in Table I.

THE STYLECARD

At this time, AGS had its own in-house

credit arrangements for its customers based

on three months credit, plus a 5 per cent

discount if the bill was settled at the end of

three months. This offering was transformed

into the Style credit card which benefited

from the large customer base and the new

EPoS system. Style was launched at the

beginning of 1982 and followed the lines of

other credit cards with no interest incurred

for prompt monthly payment. Otherwise,

minimum monthly payments could be made

over a period of time thereby incurring

interest charges.

Apart from the development of Style,

investment continued with the leasing of

61,000 sq. ft of warehousing outside Glasgow

to become a new central distribution depot.

By 1984, the Stylecard was being used not

only in the Goldberg stores, but in a range

of other non-fashion outlets such as Kwik-Fit

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

Turnover

(£ms)

15.0

14.3

16.7

17.6

20.6

28.0

29.1

30.0

32.7

36.9

34.0

32.8

38.5

44.9

51.6

59.2

—

Pre-tax

profit (£ms)

2.31

1.35

1.21

1.41

1.68

2.34

2.36

1.81

1.45

1.72

1.90

0.64

2.55

2.59

3.23

(2.92)

(10.70)

Gross

dividend

(pence)

5.51

5.70

5.76

5.69

6.26

7.46

7.50

7.50

7.50

7.50

7.50

1.43

5.65

6.55

7.38

4.00

—

Source:

Annual Repor ts

TABLE I.

Turnover and Profit 1974-1990

and the travel agents, A T Mays. It also

moved into its own offices in the centre of

Glasgow and was making a contribution of

£6.4m to turnover and a profit of £433,000.

WRYGGES LEADS THE WAY

However, the traditional customer base was

declining and the recession signalled an end

to the traditional manufacturing industries of

central Scotland. Newer, high-tec industries

were springing up and the response to the

emergence of a more aspiring customer was

to target them with the Wrygges product.

Thirteen of the Goldberg department stores

had Wrygges shops-within-a-shop. The

success of the Wrygges product led the

company to open standalone formats,

beginning with Dunfermline and Paisley.

Expansion of Wrygges into the north of

England, saw the opening of stores in

Rochdale and Warrington.

By 1985 there were 350,000 Stylecard

holders and it was at this time that AGS

announced that it was selling 60 per cent of

its Style Financial Services subsidiary to The

Royal Bank of Scotland for £4.8m. With the

repayment of loans, AGS received £10m from

the first part of the sale of Style. The bank

had an option to buy the remaining 40 per

6



VOLUME 21 NUMBER 3

1993

cent stake, which it did in 1988. Under the

deal with the bank, Style would not be able

to offer their credit facilities to rival fashion

companies before 1996.

The move to sell the Style operation was

another major decision for the strategy of

the company. The fact that the majority of

cardholders were from socio-economic groups

C1,

C2 and D meant that they were a good

fit for the bank which did not appeal

readily to these groups.

The choices between operating a retail

business and/or a credit card business needed

to be taken because of the decline in profits,

the lack of finance to invest in the retail

business, the saturation of the Scottish

fashion market, and the increasing

competitiveness and costs of financing

personal credit.

1986

With the sale of Style part completed, AGS

was left with sizeable cash assets. In March,

the Mona Lewis company, trading as Virgo,

was purchased for £1.2m. The 21 Virgo stores

were based in central Scotland and were to

be converted into Wrygges and Wrygges Man

stores. Mark Goldberg also announced the

refurbishment of the 16 main Goldberg

department stores. Table II shows the

Goldberg stores.

Goldberg town stores

Ayr

Kilmarnock

Irvine

Paisley

Clydebank

Greenock

Dunfermline

Kirkcaldy

Pollok

Dundee

Motherwell

Airdrie

East Kilbride

Cumbernauld

Falkirk

Blackpool

Goldberg city centre stores

Glasgow

Edinburgh

Wardrobe stores (Goldberg wom enswear product

only from 1988)

Ayr

Kilmarnock

Dundee

Canterbury

(Concession)

Colchester (Concession)

Cameron Toll

(Edinburgh)

TABLE II.

The Goldberg Stores

INTERNAL REORGANIZATION

The business was reorganized into two

operations: property and development; and

retail, with a managing director for each.

Michael Marks was the retail company's

managing director, had been with the

company since the mid-1950s, and sales

director from 1974.

These organizational changes were one of

many in response to the serious internal

problems highlighted by the directors and

reported in the Harvard case studies[l,2].

These problems were seen to be lack of

strategy, flaws in management style and

process, poor communication and poor

leadership. Some of the directors expressed

the need to recruit an experienced retailer

from outside on to the board itself.

The property and development company

was designed to unlock the potential of the

two owned department store sites in Glasgow

and Edinburgh. The Glasgow store was in the

heart of the merchan t city , which was

experiencing rapid housing conversions from

old warehouses. The property company at

one stage bought a Benetton franchise and

operated it for about six months in Ayr.

The year end results for 1986 saw Wrygges

sales increase by 38 per cent. The Wrygges

buying team, previously based in Glasgow,

moved to London. Wrygges had 3.4 per cent

of the 15-20 year old women's market

compared with 3.5 per cent for Dorothy

Perkins which was trading nationally[3]. The

target market was seen to be older and more

aspirational than Top Shop. There was only

one concession in the Wrygges stores

(Together) and 25 per cent of sales came

from the own-label Bu zz and Red-

handed ranges.

The company's strength in central Scotland

enabled the efficient use of TV advertising

and, coupled with the enduring benefits of

the Stylecard, sales continued apace. Forty

five per cent of Wrygges sales were made

using Style.

The Airdrie store underwent the first

refurbishment of the Goldberg department

stores. Wrygges was represented in the store

and, while total £'s per sq. ft rose from £111

to £136, Wrygges leapt from £100 to £272.

PRODUCT AND MARKET DEVELOPMENT

The full-year results announced in May 1987

saw operating profit rise from £1.31m to

£1.82m, but there was a fall in the

7



I N T E R N A T I O N A L J O U R N A L

OF RETAIL &

D I S T R I B U T I O N M A N A G E M E N T

contribution from Style from £1.25m to £0.94m.

However, Wrygges, which was by now trading

from 38 locations and Wrygges Man from

17,

saw turnover leap from £10.72m to

£16.3m. Plans for further expansion included

the purchase and development of Schuh ,

Clothing for Feet . This specialist footwear

retailer was bought from its owner, Sandy

Alexander, with the product to be a close

match to the Wrygges and Wrygges Man

customer. The agreement between Alexander

and AGS meant he kept a 10 per cent stake

in his original four-store business while

benefiting from the expertise that a plc could

offer in terms of financing and marketing. In

return AGS gained access to a new product

and market[4]. The product was all own-label

and average selling price was £22.

The pursuit of a focused and differentiated

product in the guise of Wrygges and Wrygges

Man, augmented by the corporate venturing

arrangement between AGS and Schuh further

enhanced this strategy. Yet again, the

innovative approach of AGS belies many of

the problems identified at Harvard. However,

there is another side to the argument in that

the chairman was identified by Spector and

Beerf[1] as an opportunist and expansionist

but impatient for progress. The managing

director was seen to be more concerned with

building up a robust organization.

Mark Goldberg unveiled expenditure plans

for the next year of £5.5m, of which £0.5m

was to be invested in Schuh. Schuh would

take space in Wrygges stores where available

and then develop solus sites.

FOCUS ON FASHION

The Goldberg town departm ent stores (i.e.

excluding Glasgow and Edinburgh) were to

withdraw from selling household goods,

electrical, audio-visual and soft-furnishings

and concentrate on fashion. This major

development was communicated to

operational managers by a two-day briefing

and the unveiling of the mission statement

(extracts are given in Table III). Another

major development was the creation of three

separate retail businesses — Goldberg,

Wrygges and Schuh — reporting to the retail

managing director. Each business was to

operate autonomously, with separate

managing directors as shown in Figure 1.

8



VOLUME 21 NUMBER 3

1993

Managing for the stakeholder

The stakeholders

• Customers

• Investors

• Suppliers

• Communi ty

The first part of this book let describes what we have to do for our custom ers, in order to reposition Goldberg

in the marketplace in a way that will ensure its development and growth for the future.

This second part describes what we have to become. I ts purpose is to provide the framework or context

within which we manage the business. I t is a code of practice, our shared values. This will help all managers

and their staff to improve their understanding of how we go about managing the business.

We require to take account of all parties who have an interest in the affairs of the business. They are best

described as stakeholders. This will be readily understood to refer to those who have a stake in the business,

usually thought to be the owners or shareholders, those who have invested money for f inancial return. While

their interests remain pre-eminent, we have identif ied other key stakeholders who, together with the

aforeme ntioned , are all ] inter-related and interdep enden t. We therefore serve the diverse interests of the

stakeholders.

Adoption of this concept or way of thinking will provide increased job satisfaction, and will be a key of our

success.

Michael Marks

26 March 1987

Introduction

(1) Dominance

The key to the long-term future of Goldberg lies in achieving the number one position, wherever we trade. The

opportunity lies within towns where the competition is weaker, either in numbers or in their merchandise

offering. The dominance would be achieved by delivering the total package of benefits identif ied by our target

consumers .

(2) Fashion positioning

For the substantial number of women identif ied within the target market a clear gap exists between the

directional specialists, such as Next and Principles and the variety stores, Marks & Spencer and British Home

Stores. The target consumers see the directional specialists being too narrow in their merchandise offering and

services — catering for a limited range of their needs, particularly in terms of the activity or occasion where

the merchandise can be worn. While the variety stores are becoming an increasing threat, they are not yet

developed in the variety of commercial fashion and individual merchandise packages, particularly outside their

city stores.

Exploiting this gap is our best opportunity, building on the primary strength of Goldberg — women's

fashion. We must use the maximum and best space necessary to create for our target consumers a world of

fashion clothing which, together with the relevant and related footwear and accessories, makes available the

total look .

By identifying and developing merchandise ranges within a Merchandise Mix — which comprises: the key

end uses, com fort/casua l , sm art/ be tter wea r and special occasio n ; raincoats, coats , jackets: outsize:

sleepwear/underwear; shoes; accessories; perfumes; and concessions, e.g. leatherwear, costume jewellery and

watches, and be presented in a clearly identif ied way. Space that is surplus to the women's requirement will be

prioritized in the following order: (1) children, (2) girl's, (3) men's, (4) boy's. We have to deliver consistency in

fashionability; quality; price; environment; customer services and services, i.e. f itting rooms, credit, etc.

Th e new Goldberg will be targeted on the following two consum er segments within the 25 to 54 age

group. The first segment is the woman whose children are younger and, as a result, are more dependent and

are her focus of attention. She will most likely have given up work, spending of household income now has to

be spread across a wider variety of areas than previously, so spending on clothes and accessories for herself

does decrease.

The second segment is the woman whose children are slightly older and are therefore less dependent on her.

The majority of these women go back to work either part- time or full- time. As a result, there is more money

within the household and she is able to spend more on

herself,

buy herself a new wardrobe, create a new

image.

We will all continuously study our key and emerging competitors from varying perspectives to determine how

we may gain a lead over them. For Goldberg, Marks & Spencer is the primary benchmark — being perceived

to be the best by the target consumer.

TABLE III.

Mission S tatement: Goldberg S tores

9



INTERNATIONAL JOURNAL

OF RETAIL

DISTRIBUTION MANAGEMENT

1987

By mid-1987 analysts' expectations for AGS

were £3.2m profit for 1988 and £3.8m for

1989. The major shareholders at the time

were Scottish Amicable (6.9 per cent),

Scottish American Investment Company (5

per cent), and the Goldberg family (18 per

cent).

An Australian businessman, Russell

Goward, started to purchase AGS shares

through his company, Charterhall. Between

June and October his stake increased from

5.2 per cent to 10.3 per cent[5,6].

Half-year profits rose from £465,000 to

£724,000 with sales up from £19.2m to

£22.7m. Wrygges increased sales by 37 per

cent to £9.3m, while the Goldberg stores

decreased by 3 per cent because of the

removal of the non-clothing products. The

Goldberg womenswear increased by 11 per

cent. Meanwhile, Schuh had seven

standalones and 26 concessions in Goldberg

or Wrygges stores.

INTERNAL CONFUSION

Internal conflicts arose, especially where the

three trading formats were present in the one

store. As each company had its own buying

and selling structure, the multi-format stores

had potentially three sets of store

management on site, plus three area

managers to support the structure. Therefore,

many of the functions were duplicated.

Late 1987 saw the continued expansion of

Wrygges into England (see Table IV for store

openings) and Mark Goldberg announced

tha t there were substantial resources

available for expansion by organic growth,

acquisition and joint venture [7]. There was

access to £20m of untapped borrowing

without recourse to shareholder funds, plus

the funds from the sale of Style. The strategy

was to build a dynamic group of fashion-

based businesses in specific segments of the

market[8].

Plans were afoot to develop the Wrygges

chain to 80 and Schuh to 40. Each of the

trading formats had a marketing controller.

In the case of Wrygges, which was due to

expand into England, an extensive advertising

and display team was put in place. Their task

was to communicate the growing strength of

the product through sponsorship (Wrygges

Man sponsored both main Glasgow football

teams, Rangers and Celtic) and PR activity

including the Wrygges Roadshow bus and

fashion shows in local clubs. Wrygges gained

1986 1987

(Former Virgo stores)

Perth

Stirling

Glenrothes

Dunfermline

Kirkcaldy

Glasgow City Centre (2)

Rutherglen

Greenock

Paisley

East Kilbride

Irvine

Kilmarnock

Wishaw

Hamilton

Airdrie

Coatbr idge

Schuh openings

1988 (Solus sites)

Aberdeen

Paisley

Hamilton

Hounslow

Birmingham

York

Cardiff

(plus concession space

in most Wrygges stores)

1988 1989

Ayr

Edinburgh

Manchester

Newcastle

Leeds

Sheffield

Stafford

Hanley

Birmingham

Wolverhampton

Stockton (concession)

Sunderland (concession)

Southend

Oxford Street (London)

Stevenage

N or thampton

Surrey Quays (London)

Canterbury (concession)

TABLE IV.

Wrygg es, Wrygg es Man and Schuh Store Openings

1986-1989.

extensive editorial in major magazines and

newspapers, and produced brochures for

distribution which included photos from a

Far East fashion shoot.

WARDROBE

The Goldberg womenswear product, which

had been developed by the womenswear

buying controller in conjunction with the

store operations function, was to be trialled

on its own under the facia of Wardrobe.

Particular emphasis was placed on the

ranging with regard to the fashion-basic split,

price pointing and width of offer.

Co-ordinated packages of separates were

developed, the outerwear offering (for which

Goldberg were the market leaders in

Scotland) was enhanced and underwear was

dropped from the range due to competition

10



V O L U M E 21 NUMBER 3

1993

from Marks Spencer. New units were

opened in Ayr, Kilmarnock, Edinburgh and

Canterbury.

The

Canterbury operation

was in

the form of a concession within Nasons

department store. Wrygges and Schuh also

took space in Nasons.

CONCESSIONS

With the withdrawal from non-clothing lines

in the Goldberg town stores excess space

was allocated first to womenswear with its

extended range, then children's and

menswear. Any residual space was taken up

by concessions. Both the Wrygges and

Goldberg operations

had

concessions

controllers. Companies that took space in

Goldberg stores included Adrien Mann

jewellery, Dannimac, Four Seasons and Butte

Knit, while Wrygges excess space

was

filled

by names such

as

Wrangler, Falmer, Mexx,

Together

and Ola

Clothing. Wrygges came

to

rely

on

concessions with

25 per

cent

of

turnover from them

in

some stores.

It could be argued that the use of

concessions was evidence of the declining

business in the Wrygges market (15-24 age

group). Concessions could respond more

quickly to changing customer needs, had the

benefit of being branded products with

greater customer appeal, and helped keep

staff costs down because concessionnaires

provided their own staff. The contracts

between AGS and concession companies were

initially

of a

fixed percentage

of

sales,

but

variants such

as

fixed rental

and

minimum

rental plus

a

percentage

of

sales

in

excess

of

a guaranteed threshold were introduced.

A new ICL PoS system, as used by Marks

& Spencer

and

Sainsbury,

was

commissioned

for

the

company

to

replace

the

original

IBM

EPoS

at a

reputed cost

of

£1m. Planning

at

store level, particularly

in the

Goldberg

stores, was

meticulous. Weekly reports were

submitted by managers over the telephone

from their homes on Sundays, monthly

reports were compiled on the past month's

trading and forecasts for the next quarter,

and monthly managers' meetings took place.

All these reports were made available to the

buyers. Staffing costs were controlled by the

widespread use of part-time staff. The

Wardrobe stores introduced

the

nine hours

contract (two days of four-and-a-half hours

each) with flexibility for an extra shift of

four-and-a-half hours per week, thereby

negating the need for AGS to pay NI

contributions.

1988

The Charterhall company was still on the

acquisition trail

and had

bought

the

Allebone shoe chain

for

£5m[9]. Charterhall's

stake

in AGS was 12.3 per

cent

by

April[10].

AGS announced the appointment of its

first non-executive director, together

with the resignation of the managing

director of the property and development

company.

Mid-1988 saw the creation of a joint

venture company with Ted Baker, the shirt

specialist, and the opening of four units. By

this time Wrygges had 42 stores, Wrygges

Man

24 and

Schuh

34

(including

concessions). There was still £6m left from

the sale of Style. Forty-five outlets had been

opened during 1987/88. Charterhall now had

a 17 per cent stake with rumours that they

were looking for a buyer for their

shareholding[11]. Charterhall were also

thought

to be

interested

in

GUS's Lennards

shoe chain. By August, Charterhall were

stating that they wanted to take AGS over

and had by now amassed a 22 per cent stake.

When this stake had increased to 25 per

cent[12],

they announced a cash call for £9m.

By this time,

AGS was

estimated

to be the

second biggest non-food retailer

in

Scotland[13]. Wrygges growth continued with

sales up 20 per cent to £11.lm for the half-

year. Ted Baker opened in Harrods as a

concession in November.

1989

Charterhall continued its stakebuilding to

29.9 per cent, which was the maximum

permitted without triggering

a

full-scale

bid[14]. February

saw a

profits warning from

Mark Goldberg, saying that there had been a

reduction in anticipated sales. However,

overheads were to be reduced by £1.5m with

the restructuring of the operating company

(see Figure 2). He also announced the

purchase

of Ray

Kelvin's Personal Contact

Group, which

had a 50 per

cent stake

in the

Ted Baker joint venture. The PC Group was

a clothing design and sourcing company and

cost AGS £1.1m, plus a series of loan notes.

PC

had a

turnover

of

£14.4m with

a

loss

of

£135,000. Kelvin was to join the main plc

board

as

Product Development Director[15],

and commanded a salary of £70,000 while

the Chairman and Managing Director each

received £50,000.

11




OF RETAIL


NEW APPOINTMENTS

A few weeks later, Norrie Stewart, the

Managing Director of the Wrygges chain and

an instrumental figure in the development

and expansion of the Wrygges product,

resigned. AGS announced that it was looking

to appoint a Marketing Director[16]. Later in

the year, the company dispensed with

Scottish-based Noble Grossart as its

merchant bankers in favour of NM

Rothschild.

The Goldberg womenswear controller, who

had successfully built up a small team of

buyers and merchandisers, was given

responsibility for the Wrygges product.

However, she left a few months later to join

Chelsea Girl (as buying controller), which

has since devised the River Island format.

The full-year results announced in June

revealed the first trading loss in 50 years with

pressure increasing on Mark Goldberg from

Charterhall to resign. The poor results were

blamed on unseasonal weather and cost

pressures with plans to exploit the owned

property assets of the Glasgow and

Edinburgh department stores[17]. The Ted

Baker group had by now grown to eight

outlets selling shirts up to £40 and

accessories but was still trading at a loss.

Another round of cost-cutting ensued with

a reduction of 4 per cent (75 people) in the

workforce through compulsory redundancies.

Six stores were to be closed. Rents for the

Group had risen from £4.75m to £7.5m in

the year. Analysts' forecasts for 1989/90 were

£1m profit but Mark Goldberg hinted at an

interim loss due to poor weather[18]. At the

AGM in July, Mark Goldberg had proxy

votes to block any moves by Charterhall, and

announced plans to licence Ted Baker in the

US with Macy's[19].

By August, it became likely that the sports

and leisure retailer, Blacks, was to make a

bid for A GS . It was to m ake a 22 for 1 all-

paper offer which would lead to Blacks

issuing another 275m shares. It had the

backing of Charterhall which held almost 30

per cent of the shares[20]. Blacks claimed it

could strengthen the AGS operation and had

plans to use 15 of the English Wrygges stores

for their First Sports and Alpine Sports

operat ions.

Later that month Mark Goldberg issued

another profits warning and analysts

predicted a full-year loss of £0.5m[21]. The

first half of the year was traditionally the

poorer, with Christmas falling in the second

half. Meanwhile the company was preparing

its defence document to the hostile £33m all-

paper bid of Blacks. This document pointed

out that Blacks had assets of £67m and debts

of £10m, while Goldberg had assets of £23m

and debts of £4m. The defence document did

not include a profits forecast.

12



VOLUME 21 NUMBER 3

1993

The Goldberg board announced the

development of another retailing format,

ING , which was to take over the Oxford

Street branch of Wrygges and one of the

Glasgow sites[22]. The second Goldberg

defence document m ade no profit forecast,

while Blacks pointed to the fact that the

Goldberg assets were not readily realizable

(£17m in fixtures, fittings, etc., and £7m in

stock)[23].

By the end of August, Blacks had

35 per cent of shares backing its bid of

which almost 30 per cent were Charterhall's

— the offer was extended to 12 September.

On 7 September, Fletsland Investment, the

owners of Lewis's department stores,

announced that it had a 1.05 per cent stake

in AGS[24]. It had held talks with the AGS

board about a possible merger. Two days

later its stake rose to 1.35 per cent. Mark

Goldberg announced, on 11 September, that

an agreement licensing Ted Baker shirts had

been signed and a Kleinwort Benson analyst

said, Ted goes foreign and brings in the

bucks [25].

By the 15th of the month, the

Fletsland stake had increased to 2.14 per

cent[26].

On 19 September, Mark Goldberg

was predicting that losses for the first half

would be in excess of the previous year's full-

year loss[27]. The Blacks bid finally failed on

29 September, having reached 39 per cent.

ING WAS AIMED

AT THE FASHION

CONSCIOUS MARKET

By mid-October, ING was on stream. It was

aimed at the 18-30 years-old fashion

conscious market, with an up-market

designer appeal. The half-year results were

announced in November and showed a loss

of £4.58m with £0.5m being apportioned to

the costs of deflecting the hostile takeover

bid[28].

However, it was also revealed that

the major Edinburgh off-centre department

store was to be sold for £3.5m. The Wrygges

business generated sales of £11m, while the

Goldberg division was trading profitably with

sales of £9.4m.

By December, Fletsland had a 5 per cent

stake in the company. Chairman of Fletsland,

James Fyfe, said that the holding is a trade

investment... no plans for joint venture or

other forms of co-operation , nor was he

seeking a merger or takeover[29]. The stock

market speculated that a reverse takeover was

a possibility as Fletsland was the

management buy-out vehicle used to

purchase Lewis's from Sears. Lewis's had an

annual turnover of £200m.

Towards the end of December, Mark

Goldberg announced the appointment of a

second non-executive director, John Ashton,

the Group Finance Director of Coats

Viyella[30].

The company was to review the

business during December and January.

Forecast losses for the full-year were put at

£7m. Another round of cost-cutting was put

into action.

1990

The New Year brought the arrival of a new

Chief Executive (previously Mark Goldberg

had combined the role of Chief Executive

and Chairman). Adrian Atkinson had been a

Senior Manager and Executive with Marks &

Spencer for 16 years, had been seconded to

be Head of the Cardiff Enterprise Agency,

worked for Body Shop as Operations

Manager, and had more recently been

Managing Director and Chief Executive of

Gordon Fraser Greeting Cards[31].

Early February saw Charterhall go into

liquidation and Fletsland taking 20 per cent

of these shares at an average of 68p

(Charterhall bought at an average of

198p[32].) AGS announced the closure of 20

stores (ten in England) and the relocation of

the head office function from Glasgow to

London. The buying operation was already

located there. One hundred head office staff

would be made redundant and were given six

months notice. These costs would lead to a

reduction of overheads by £10m on an

annual basis. Meanwhile, Mark Goldberg was

talking to Fletsland about a specific

interest and James Fyfe, speaking about the

25 per cent holding in AGS said that we are

not in the business of making passive

investments [29].

The new Goldberg strategy included

signing a deal with the Clothes Show

presenter and designer Jeff Banks. His design

company, HQ, was to launch a range of

men's and women's clothes in the Wrygges

stores,

which were to be renamed as News .

Banks went on to say, I have had a lot of

market research done to see where Wrygges

has been going wrong, and where the market

was shifting to in terms of products and age.

I devised a branding and a product concept

which I think will marry with the

13




OF RETAIL &


requirements of the future [33]. The target

market was to be the 18-40 age group. The

design of the merchandise would be in-house

and the range was to be launched within nine

weeks in the remaining 15 Wrygges stores

and on a concession basis within nine of the

Goldberg stores. The cost of the launch was

put at less than £250,000.

April saw the failure of the sale of the

Edinburgh department store which was due

to be completed on 15 February. May

brought the launch of News with Jeff Banks

embarking on personal appearances in the

stores,

receiving widespread national press

coverage and committing himself to a 20-year

licensing deal.

At the end of May, just one month into

the recent News project, AGS shares rose by

9p to 49p. Adrian Atkinson said this was,

inexplicable and unw arranted and that the

company was in discussions which could lead

to it mak ing a major acquisition involving

an issue of a very substantial number of new

shares

[34].

Laing and Cruickshank,

Stockbrokers, were predicting losses of £15m

and this led AGS to promise that it would

issue its full-year results with an

announcement on the outcome of its

discussions with Fletsland.

On the same day that Coloroll announced

major losses and appointed receivers, AGS

were forced to do the same with the news

that it had made a trading loss of £9.6m and

had interest charges of £1.1m. Debts were

believed to be £15m. The shares were

suspended at 37p[35]. Fletsland's stake of 25

per cent was believed to have cost £3.5m.

By mid-June, Mark Goldberg stepped

down as Chairman, and there were 57 outlets

still trading. By the end of September all the

stores had closed. Sandy Alexander, with the

financial backing of Edinburgh Woollen

Mills Ltd, bought back four of his Schuh

stores,

and Ray Kelvin purchased his Ted

Baker creation. Jeff Banks still holds rights

over the News name.

References

1. Spector, B. and Beer, M., A. Goldberg Sons

plc (a) (Case 9-483-110), Harvard Business

School, Boston, MA, 1983.

2. Beer, M. and Kaftan, C., A Goldberg Sons

plc (B), (Case 9-485-024), Harvard Business

School, Boston, MA, 1985.

3. Market Place, Spring 1986.

4 . Ho w Goldberg found its new Schuhs ,

Scottish Business

Insider

December 1987.

5. The Financial Times, 16 June 1987.

6. The Financial Times, 28 October 1987.

7. The Financial Times, 6 November 1987.

8. Goldberg & Sons plc, Annual Report, 1988.

9. Market Place, Spring, 1988.

10. The Financial Times, 13 Ap ri l 19 88.

11.

The Financial Times, 25 May 1988.

12 . The Financial Times, 21 September 1988.

13. Marketing Week, 7 October 1988.

14. The Financial Times, 11 February 1989.

15 .

The Financial Times, 21 February 1989.

16. Marketing Week, 3 March 1989.



19 .

The Financial Times, 14 July 1989.

20. The Financ ial Times,1 August 1989.

21 . The Financial Times, 11 Augu st 1989.

22. The Financial Times, 22 August 1989.

23.

The Financial Times, 30 August 1989.

24. The Financial Times, 7 September 1989.

25. The Financial Times, 11 Septem ber 1989.

26 .

The Financial Times, 15 September 1989.

27. The Financial Times, 19 Septem ber 1989.

28.

The Financial Times, 18 November 1989.

29. The Financial Times, 1 December 1989.

30 .

Glasgow Herald, 6 December 1989.

31 . Glasgow Herald, 6 January 1990.

32. The Financial Times, 28 February 1990.

33.

The Sunday Times, 4 March 1990.

34. The Financial Times, 30 May 1990.

35.

The Financial Times, 8 June 1990.

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