Merry gentleman

Recession or no, the city boys need to keep looking sharp. Nick Wheeler tells Stuart Anderson about banks, receivers and building a £100 million shirtmaker.

“There are over 60 million people in the UK,” says Nick Wheeler, founder of the Charles Tyrwhitt shirtmaker and gentlemen’s outfi tters business that bears his two middle names.

“They all need shirts.” Wheeler is explaining why the business he started while studying geography at Bristol University in 1986 is focusing on its established markets in the UK, US and Germany rather than chasing the emerging middle classes in the likes of China and India.

“M&S has a multi-billion pound business in the UK, so there’s no reason why we can’t have a multibillion pound business in the UK. You’ve got to start somewhere.

“Our growth in the UK is still extremely good. We’re growing like mad in the UK.”

Halfway through Charles Tyrwhitt’s fi nancial year the company is, he tells ahead of its budget to achieve forecast sales of £104 million in 2011-12. Last year it turned over £84 million, up from £57 million in 2010.

Wheeler is no barrow boy made good but the Charles Tyrwhitt story so far is every bit as entrepreneurial as the rags-to-riches tales that turn businesspeople into TV stars.

With a string of “not particularly successful” ventures behind him by the time he left school, as a student he decided to get into the mail order shirt business and, via a friend of a friend, managed to source some cotton from Lancashire firm Acorn Fabrics, who recommended a small – and now long-defunct – factory in Clacton, Essex, to make his shirts.

The business continued to be a part-time interest after he left university and joined management consultant Bain. Then, in 1989, after two years in the corporate saddle he decided that if he was going to throw himself into the shirt business it was now or never.

He says, “It’s one of the glorious things about youth – you think you’re getting old when you’re, what was I then, 24? I felt that I was just past it slightly and if I didn’t do it now I’d never do it.

“And actually it was probably slightly true. Once you get on to the treadmill of life, taking on more and more responsibilities and expenses, you need your salary if you’re not careful.”

So Wheeler left Bain, rented a small office in Fulham for £4,000 a year and set about building a marketing database for what was at the time a purely mail order business.

“I just used to beg, borrow and steal names, really,” he explains.

“It’s what mail order is – it’s about a database.

“I had a second cousin who was in the 17th/21st Lancers, for example, and he gave me – which today would be extremely illegal because of data protection – the list of 17th/21st officers, about 2,000 of them.”

A year later, in 1990, a former Bain colleague, Peter Higgins, joined and took a 27 per cent stake in the business.

Wheeler capitalised Charles Tyrwhitt with a punt on a classic car. He put an £8,000 legacy from a great aunt together with a loan from Barclays bank to buy an Aston Martin DB1 – “a pretty awful car” –for £25,000. A year later he sold it for £100,000, giving him £83,000 start-up capital, “which I promptly lost in the first year”.

But, because it was his own money, he and Higgins kept their equity intact. They knuckled down and by 1994 Charles Tyrwhitt was turning over £2.5 million and making a profit. So, emboldened by the example of the likes of Lord Hanson, they “went on a rather ungrand acquisition trail” and bought a children’s clothing retail business.

“It was just a disaster,” he says. “We lost more money in about three months than we’d made in the past three years.”

And so, inevitably, the receivers were called in. Having learned an important lesson about sticking to their knitting, Wheeler and Higgins bought the business back from the administrators “for the value of the creditors”.

This taught them another lesson: “At the time I rather naively thought that the creditorswould all get paid out. In reality what I didn’t realise was that the receivers would tend to go around pushing paper until they used up all the money, so the creditors get nothing and they get everything.

That was a shock.

“So at the end of the day, for example, we paid our tie suppliers an extra pound a tie until we had paid them off.”

In 1997 the company opened its first shop, in the world’s shirtmaking capital, London’s Jermyn Street.

Wheeler says he didn’t really care at the time whether it made money – he opened it, primarily, to add credibility to the mail order business.

The company now operates 17 shops, including two in New York and one in Paris, which generate about 25 per cent of Charles Tyrwhitt’s revenues.

And in 1998 the company launched its website. This now accounts for 70 per cent of sales (the remaining five per cent comes via traditional mail order).

Then, in 2005, Wheeler says Higgins had had enough of sitting in the same office as him and decided he’d like to do something else with his life. So he bought out all but five per cent of Higgins’s shareholding and, though the latter remains on the board as a non-exec, Wheeler was effectively on his own.

At this point Wheeler took another decision: “I thought, ‘Am I the right person to run this business?’ I think the only decision an entrepreneur has to make is who the right person is to run their business.”

He decided that in this case it wasn’t him. “We were doing about £40 million sales and it was a very different business. We had 250 people, there was a lot of HR, it wasn’t just a rough and tumble small business anymore,” he explains.

So he brought in a managing director from Ralph Lauren, who – with Wheeler’s blessing – set about transforming Charles Tyrwhitt into, er, Ralph Lauren.

And history largely repeated itself: “We really ramped up the men’s side, formal and casual, women’s formal and casual and, horror of horrors, children’s again.

“And very quickly we went from £40 million making £3 million, the following year we went to £50 million making nothing, and we ended up with a huge amount of stock that our customers didn’t want to buy.”

This led the company to “slightly breach” a banking covenant in 2007 – just before the financial crisis, thankfully – and RBS, the company’s bank of 14 years’ standing, “came down on us like a ton of bricks”.

“We had an overdraft of about £2.5 million,” he continues. “They said they’d renew the overdraft but they wanted a 35 per cent stake in the business.”

Fortunately Wheeler had also been flirting with HBoS for some time, and the latter agreed to take the company out of RBS, “which was actually very good of them because by that stage we’d breached a covenant and weren’t an overly attractive proposition”.

This, he says, “probably saved the business”. Business saved, Charles Tyrwhitt and its managing director parted ways and Wheeler took the helm while the company traded through its stock.

Since 2008 he has returned to the back seat, having appointed Greg Hodder, who has a mail order background, as MD.

And, throughout the recession and ongoing economic doldrums, the company has grown with remarkable speed. Wheeler credits a combination of service, quality and value as the keys to the brand’s success.

The company, which today generates about 25 per cent of its revenues from the US, 25 per cent from Germany and 50 per cent from the UK, gets “a lot” of its shoes made in Northampton and sources much of its suit fabric from Yorkshire, but makes its shirts in places like Egypt, Peru and Portugal and has its suits cut in Portugal, Italy, Romania and Poland.

Why, EN wonders, doesn’t it get suits made in the cheaper Far East?

“One of the really important things in mail order is that if you put something in the brochure you need to have that product,” Wheeler says. “The customer expects you to have it.

“The problem with places like China, which are much further away, is that you tend to get lower prices but much, much longer lead times, so you need to forecast a year ahead that, ‘I’m going to sell 2,000 of that product.’

“If you sell 2,000 in the first two weeks you can’t get back into it in the season, whereas in Europe you might be paying more for each product but you actually end up making more money because you can get back into it.

“Equally, if you say you’re going to sell 2,000 and you only sell 200 you’re really stuffed because you’ve got 1,800 products that you can’t sell, whereas in Europe you can buy 200, you sell 200 and you can get more in.”

The company now employs just over 500 people and has got to a level where – fluctuations in raw material prices notwithstanding – the pre-tax profit margin is pretty constant at about 12 per cent.

So the focus is now on top-line growth, which Wheeler plans to achieve using, basically, the database building that has served Charles Tyrwhitt well up to now. He continues, “We will do list swaps with other, non-competitive mailorder companies, we do a lot of inserts that we’ll put into magazines, which you might have seen. And that brings in new customers.”

Then he just has to keep them – largely, he says, through great customer service. “My total passion is customer service,” he says. “That sounds really clichéd but the sort of thing I do, which is slightly different, is that every product that goes out has my email address on it, and that email comes to me –it doesn’t go to anyone else.”

The firm also solicits online feedback when orders are completed, via third party company FeeFo (in which Wheeler is the major shareholder), which is then shared in real time on the Charles Tyrwhitt website.

Wheeler now goes into the office about one day a week, although he says, “I think about the business a lot”. So, is the 46-year-old, who is married to Chrissie Rucker, founder of £109 million turnover haberdashery and homewares firm The White Company, planning to cash in his chips any time soon?

Apparently not. Wheeler, who founded the company with the modest ambition to be “the best shirtmaker in the world”, says, “I’ve been in the business for 25 years and I hope I’ll be in it for another 25 years. Some people want to build a business because they want to sell it and make some money. I just want to build it because I love it.”

But that doesn’t mean he isn’t ambitious. “If we can grow 14 per cent a year for the next 18 years, we’ll be a billion pound business,” he says.

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