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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.
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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
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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
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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.
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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
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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
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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.
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INTERNATIONAL JOURNAL
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DISTRIBUTION MANAGEMENT
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.
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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
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INTERNATIONAL JOURNAL
OF RETAIL &
DISTRIBUTION MANAGEMENT
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.
17. The Financial Times, 1 June 1989.
18. The Financial Times, 22 June 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.