The Drapers Interview: Adrian Mountford on Pep&Co's '50 stores in 50 days'
Posted by Drapers on 4th Sep 2015
From the crowds jostling inside the Maidstone store on one of this summer’s few hot, sunny days, you would have thought it was the opening of a new Primark: queues outside store openings of the Irish value fashion chain are a common sight.
But this is what Drapers finds at the new Pep&Co shop at its opening on August 7, in The Mall Maidstone, one of the Kent town’s shopping centres.
Managing director Adrian Mountford is propped up against the till,being snapped by Drapers’ photographer, but soon has to make way for a procession of mums and silver-haired women eager to pay for their bargains.
For a new brand few will have heard of, Pep&Co seems to have caught the public imagination with its plans to open “50 stores in 50 days”, and its slogan, “Spend a little. Get a lot”.
The value chain is the brainchild of former Asda chief executive Andy Bond and Mountford, who was previously on the board at value rival Matalan and headed Sainsbury’s clothing business Tu.
Pep&Co is the first investment by Pepkor UK, which is headed by Bond and former Bain & Company consultant Mark Elliot. It is part of South African investment company Pepkor, which is owned by South African billionaire Christo Wiese.
The £20m, 50 store-opening programme began in Kettering on July 1,and is continuing in mainly secondary towns. The 6,000 sq ft sq ft Maidstone store is number 19 (see list), and there are more to come between now and mid September.
Leaving the throng of the store behind, the friendly and upbeat Mountford is keen to explain how it all came about.
Andy Mountford, Pep&Co “I met up with Andy two and a half years ago and we first talked about it in a Starbucks on Wigmore Street [in London],this idea of giving shoppers value clothing where they go to buy value food, value general merchandise, and value pharmacy,” he tells Drapers, as we sit in a cafe outside the shopping centre.
“Customers in these areas [market towns and secondary locations]can buy value everything except clothing, and it felt like an opportunity. It has taken us two and a half years to get to this point.”
Mountford believes price and a product aimed at mums who are more likely to be a “fashion follower” will set it apart.“We are the cheapest show in town and that is what we have always set out to be and we are giving customers a real value shopping experience for clothing.”
Indeed, Pep&Co is as cheap as Primark, which also has a strong high street presence: prices start at £1, rising to a top price of £25,and 95% of products priced under £10.
Mountford adds that Pep&Co’s customer is slightly older than Primark’s, which known for its strong young fashion offer.
“I think we can exist together, and our strong kidswear offer is also a point of difference. Look… ” he says breaking off, as a fleet of three mums wheel their prams into the coffee shop.
To illustrate his point he gestures to another mother and her daughter: “This lady sat here behind you, she has come into town with her daughter to have a coffee and socialise.
“They haven’t necessarily come to buy anything, but will if something catches their eye.”
“Customers’ shopping habits are changing now. It is very well documented that the supermarkets are struggling. People are doing a big shop and then stocking up during the week in Aldi, in Lidl, in Iceland, in places like this.”
The supermarkets may have been the architects of the challenges they now face.
“Tesco and Sainsbury’s have done us a massive favour because they have been opening convenience store formats in towns like this,drawing people into the high street.”
Opening in the kind of secondary locations that many fashion chains have exited does, of course, mean cheaper rents and landlords are willing to be more flexible, admits Mountford.
“Certainly rents and occupancy costs in towns like this are a lot cheaper. That helps to make the model work for us.
“It is very important we keep our costs under control in every single respect. And obviously store occupancy costs are one of our biggest costs.”
He adds: “Landlords have also been very flexible with us in trying to find the right deal. I think partly because we are backed by a massive group and partly because of Andy’s involvement.
“We all want the units around us to be thriving, because it brings people into the town and the landlords want this too,” he says before breaking off again to point out yet more mums pushing their prams into the coffee shop, this time, one of them brandishing a Pep&Co bag. “There you go, there she is,” he laughs.
The landlords Drapers spoke to heaped praise on Mountford and Bond’s plans. Pep&Co has taken nine town centre units at Ellandi’s shopping centres, among them the Pentagon Shopping Centre in Chatham and the Priory Shopping Centre in Dartford.
Ellandi asset management director Alex Brooker says: “We were one of the first landlords to sit down with them, and they have opened with us in Kettering, Chatham, Grays and Dartford, among others.
“They had a really refreshing approach and knew what their margins were, and what type of unit they were looking for, rather than just thinking about saving on cost.” He adds that Kettering was trading at 40% ahead of budget in the first week, and since then the nine stores are still trading at 15% ahead of budget. Ellandi is now speaking to Pep&Co about its second wave of stores.
Pep&Co also took five stores in NewRiver Retail’s portfolio,opening in Hull, Boscombe, Warminster, Paisley and Newton Mearns. The stores average 4,000 sq ft.
“We’ve met with senior management and think very highly of the team. The shop fit is a high quality finish and the product range is strong,” says NewRiver Retail director Stuart Mitchell. “There was a clear gap in the market for this offer.”
Mountford explains that Pep&Co has been careful to place its stores in varying locations, from city centre shops in Hull and Coventry, to medium-sized towns such as Maidstone, and smaller towns like Kettering.
“So when it comes to looking for the next batch of stores, we will have a much clearer idea of where to target our store estate,” he says.
Now around six weeks into trading, Mountford says they are pleased with performance so far, despite having “launched with an autumn range at a time when everybody was on full bang on Sale at 50% off everything with their summer product”. The autumn range is one of the hurdles faced by the nascent business model.
“We decided we needed 50 stores to get the volume [of sales] that we needed to be able to deliver the prices we are offering, so we have had to launch with one range.
“So it wasn’t ideal for July 1 in Kettering, and it won’t be ideal for our September openings. All of the stores will catch up when in October when we launch phase two, which will include knitwear and winter coats.
"We will sell out of some lines before then, so we are trying to get phase two delivered early."
Pep&Co is benefiting from parent company PepKor's global sourcing capabilities, so has been able to repeat into its most popular lines already, accessing shorter lead time suppliers in places such as Turkey.
"The biggest question we've been asked in every single store is do you do menswear? Customers are wheeling a buggy in with their husband, saying, 'We have come in to look at your menswear,' and I have to say, 'I'm sorry, we don't have any menswear', and they have just gone out."
As a result Pep&Co will launch menswear in November, with a Christmas gifting range of festive knits, T-shirts,polo shirts, socks and underwear. This will then be followed by a core essentials range for men, which will include a range of jeans, chinos, shorts, knitwear,casual shirts, and a small range of footwear, such as flip-flops.
The pricing will be in line with its womenswear, and will be introduced to “most” stores, by reconfiguring the layout of fixtures. Stores of less than 3,000 sq ft will not stock menswear.
Mountford’s relentless drive to push the business forward into new stores and product areas comes as no surprise when you look at his retail track record. He grew up in Wetherby in West Yorkshire, where he left school to work for local furniture company George Moores in 1982.
However, fate played a hand when he fell and broke his wrist during a football match, only to be tended to by the wife of Tom Harrison, the buying manager at John Collier menswear, a chain that had around 120 shops at its height in the 1980s, before being purchased by the Burton Group in 1985. A friendship ensued and Harrison gave him his first “proper job” aged 19 in buying.
At 22 years old Mountford moved to London to join Hornes menswear, a chain that had around 90 stores in its heyday in the late 1980s, as an assistant buyer, then being promoted to buyer. He then left to join another menswear business called Review, which was owned by Sir Philip Green.
“It was a great experience for me,” he says. “We were buying straight from the Far East with quantities of 300 to 400, so it really got me into that trading mentality.” However, after four years Mountford decided to jump ship and join BHS in 1993 as a men’s formal wear buyer.
“BHS may have seemed a little odd but it was an opportunity for me to get back into working for a big company. I stayed there for 14 years and loved it.
“The last four years were working with Sir Philip Green, by which time I had become head of childrenswear, and I learnt an enormous amount from him.”
Then, he says he got “the chance of a lifetime” to go to Sainsbury’s and work alongside Richard Jones to work on the Tu clothing range in 2005, which, he says helped put him “on the map”.
It was during this time that he became aware of Bond, who himself was running the George clothing business at Asda. Mountford then joined Matalan for two years, before deciding to team up with Bond.
The duo now have big plans. Mountford sees no reason why Pep&Co’s portfolio couldn’t swell to 800 to 900 shops in the UK, citing the footprint of value chains Poundland and B&M Bargains as a template.
So, it looks like a busy road ahead, then?
“Yes. I’ll probably be dead,” he jokes, before adding: “We knew that we would learn a huge number of lessons.
“We’ve got quite a lot right, but we got quite a lot wrong as well. But I think it has given us the confidence to suggest that actually we are onto something here.”