Type: Private Company
Address: Caledonia House, Caledonia Street, Paisley, PA3 2JP, United Kingdom
Telephone: (44 0141) 887 9151
Fax: (44 0141) 887 8069
Web: http://www.mackaysstores.co.uk
Employees: 2,700
Sales: £159 million ($283.60 million) (2005)
Incorporated: 1834 as J. Mackays (Drapers) Ltd.; 1973 as Mackays Stores Group
NAIC: 448120 Women's Clothing Stores; 448110 Men's Clothing Stores; 448130 Children's and Infants' Clothing Stores
SIC: 5621 Women's Clothing Stores; 5611 Men's & Boys' Clothing Stores; 5641 Children's & Infants' Wear Stores
Mackays Stores Group Ltd. is one of Scotland's oldest retailers and is a leading operator of clothing stores throughout the United Kingdom. The Paisley-based company operates more than 300 stores in Scotland, England, and Wales, and, since 2007, in Northern Ireland. Although many of the company's stores still bear the Mackays name--long one of the most well-known names in the United Kingdom's shopping districts--Mackays launched a rebranding of its network in the first decade of the 21st century. As part of that process, the company has rolled out a new store brand, M&Co. The new brand shifts the company's target market away from its traditional image as a discount family clothing supplier toward a more upscale, women's fashions format.
The company's stores feature a department store format, and include sections for ladies' wear and lingerie, as well as separate departments for plus, petite, and tall sizes. The company targets the younger girls' market with its Kylie brand, which is backed by a popular web site and ezine. Mackays stores also typically feature a large home-wares section, as well as men's and children's sections. Mackays' own clothing lines include more than 4,000 designs, most produced by the company's own design team. Mackays also operates a buying office in London. Mackays remains controlled by the McGeoch family, with chairman and CEO Iain McGeoch holding more than 90 percent of the company. In the middle of the first decade of the 21st century, Mackays stores generated revenues of more than £160 million ($300 million).
From Pawnbroker to Clothing Seller after World War II
Mackays originated as a pawnbroker's shop in Paisley, Scotland, in 1834. Founded by the McGeoch family, the pawnbroker business grew into a string of shops by the end of the century, and later took on the name of J. Mackays (Drapers) Ltd. The movement toward the modern day Mackays retail group came in the years following World War II, when Neil McGeoch converted a number of the family's pawnshops into clothing stores. The first store, opened in Clydebank in 1953, proved a success and over the next decade the family converted its other stores to the clothing format.
The company's fortunes truly took off as the next generation of the family entered the business. Lennie McGeoch joined his father at the company in 1961, followed by younger brother Iain in 1965. The family continued to open new stores through the decade, focusing on the market in Scotland. By the end of the 1960s, Mackays boasted more than 50 stores in operation. The company then made its first move outside of Scotland, opening a store in London in 1970. As part of its move south, the company bought another retail clothing chain that year, Ghinns Ltd. Based in Peckham, London, Ghinns brought seven subsidiaries to Mackays, as well as a small shopfitting operation, Havelock Textiles (later Havelock Europa), created in 1963.
Neil McGeoch retired from the business in 1973, turning the company over to his two sons, who shared the managing directors positions. The brothers proved highly complementary, with Len McGeoch focused on the textiles side of the business, while Iain McGeoch oversaw the group's real estate side. The company soon distinguished itself by its choice of location. Rather than acquire sites in the country's major urban markets particularly in the highly competitive "High Street" shopping districts, Mackays targeted smaller, often rural markets largely ignored by competitors. Another strategic success for the company came from its adoption of a discount pricing policy. By maintaining its own design staff, and carefully selecting manufacturing partners, the company was able to build its reputation as a retailer of quality clothing at low prices.
Mackays continued to build up its store network through the 1970s, gradually expanding into a national clothing operation. The company also saw growing success from its Havelock shopfitting business, which was regrouped as a separate division in 1972. At first Havelock focused its operation on Mackays' own fast-growing string of retail stores. In 1974, however, the company made the decision to begin offering its shopfitting services to other retailers, and restructured Havelock as an independently operating subsidiary. Havelock quickly emerged as a leading player in that market, and by the early 1980s had outgrown its parent company. Recognizing this, Mackays spun off Havelock as a publicly listed company in 1984, placing its shares on the London Stock Exchange's Unlisted Securities Market. Mackays held on to a 49 percent stake in the company until 1986, when Havelock was merged with Fife-based Store Design Ltd., becoming one of the U.K.'s top shopfitting specialists.
Entering and Retreating from the United States
By the mid-1980s, Mackays' U.K. operations had grown to more than 150 stores. Buoyed by this success, the company decided to cross the Atlantic and build up a new empire in the United States. Leading this effort was Len McGeoch himself, who moved to the United States and oversaw the acquisition of Apparel Affiliates, Inc., in 1986. Originally a clothing manufacturer focused on career women's clothing, that company had also built up a national network of 120 stores, operating under such names as Corner House, Paraphernalia, Para, and Parallel.
Soon after the takeover, Mackays shut down its U.S. manufacturing business, and instead began contracting out for the production of its clothing designs. The decision proved an unfortunate one for the company. By the end of the decade, as the workplace adopted an increasingly more casual clothing style, Apparel Affiliates suffered from the drop in demand. Furthermore, the group was hurt by the long lead times required by its manufacturing contracts, hurting the group's ability to respond to the shift in the market. By the end of the decade, Mackays' U.S. subsidiary had seen its network drop back to just 105 stores. Worse, the subsidiary had slipped into the red, posting a loss of nearly $6 million on sales of just over US$46 million. The company initially sought a buyer for the operation. However, faced with the prospect of waiting at least six months for a sale, the U.S. business instead declared bankruptcy.
Mackays had not fully abandoned its efforts to expand internationally, however. Into the 1990s, the company acquired licenses to operate Benetton shops in Australia, Scotland, and Ireland. However, Mackays failed to find a good fit with the Italian clothing chain, and eventually abandoned that business as well. Len McGeoch returned to Scotland, once again overseeing the main company's textiles operations. Mackays made one last attempt at international expansion, opening a store in Poland in 1996 and setting up a franchised children's clothing store format in China. Both operations were shut down by the end of the decade.
In the meantime, the McGeoch brothers had made moves to step back from the company's day-to-day operation. In 1996, the brothers, who remained co-chairmen, turned over the managing director's job to a family outsider, James Pow. The move, which also involved the hiring of a new financial director, was seen as preparation for a public listing of the company. It also coincided with the headlines raised by Len McGeoch's divorce; his American-born wife succeeded in winning the largest divorce settlement made by a Scottish court. The divorce trial also provided a glimpse into the lifestyle of the extremely publicity shy McGeoch family.
Mackays' plans for a public listing seemed to be moving forward in 1998 when Len McGeoch announced his decision to retire, at first to Ireland, and later to Portugal in order to play golf. In addition, a dip in the company's profits into the second half of the decade, which came in part because of attempts to expand the group's clothing mix beyond the discount price range, forced the group to put the public listing on hold. The failure to go public also resulted in the abrupt departure of company CEO Pow that year. Into the end of the decade, the company refocused its product line around its core low-price strategy, trimming its store network back from a high of 270 stores at mid-decade, and launching a revamping of its store brand. The improvement in profits then led the company to seek to sell the company outright. By 1999, the company was said to have approached the Close Brothers merchant banking group to help find a buyer for the business.
In the end, however, the McGeoch brothers decided to keep the company in the family. In 2001, Len McGeoch agreed to sell his stake in the business to his brother Iain McGeoch. The younger McGeoch then controlled more than 90 percent of the company, with his mother holding a 1 percent stake, and most of the remainder shared out to company employees. These included a new CEO, Paul Vann, who later boosted his stake in the company to more than 4 percent.
Expansive Mood for the New Century
By then, Mackays had rebuilt its retail network to nearly 260 stores. However, as Vann promised to the Scotsman, the beginning of the century was expected to be "the start of a new dynamic era for Mackays. We have been one of Britain's best-kept secrets in many ways, but there is no doubt that we are second to none in our reputation as a value-for-money retailer." The upbeat Mackays sought to capitalize on that reputation, announcing plans to add 25 new stores and more each year.
The slump in the United Kingdom's economy that year created a glitch in the company's immediate plans, however, as its new store openings proceeded at a crawl. In 2003, the company appeared to have a found a new formula for expansion, when it acquired the Laroque chain of clothing stores. The acquisition of more than 20 retail stores provided Mackays with a presence in the Coventry area of the Midlands for the first time. It also gave the company a test market for a new store concept, M&Co.
With its new store format, Mackays sought to position itself on the upscale side of the clothing market. The lowering of European trade barriers with China had led to the inundation of the United Kingdom and the rest of Europe with that country's low-priced production. The flood of cheaply produced textiles encouraged the increasing adoption of department store-like hypermarket formats by the United Kingdom's major retailers, placing Mackays and other retailers under even greater pressure than before. In this light, Mackays' interest in a more upscale, women-oriented product mix could be seen as a defensive move. The development of the M&Co brand also allowed the company to rejuvenate its image, broadening its appeal into the younger, more modern consumer segment.
The success of the M&Co launch soon led the company to roll out the brand across the whole of its women's clothing lines. Mackays then added a number of other new brands, including Kylie, targeting the fast-growing trendy young girls' market, and Kidzunlimited for its children's clothing lines. Backing the reorientation of the group's branding and marketing strategy, Mackays beefed up its buying, merchandising, and sourcing operations. As Vann explained to the Herald: "You can't get away with producing fuddy-duddy clothes for the 35 to 50 age range any more. People are now prepared to buy what we offer at full price."
If the rest of the U.K. retail clothing sector remained in the doldrums through the first half of the decade, Mackays' own M&Co-driven fortunes remained buoyant. By the beginning of 2005, the company had converted 23 stores to the new format. The company, which instead of adding new stores had been streamlining its existing portfolio of locations, announced new plans to add up to 20 new stores that year.
The surprise departure of Paul Vann that year led the company to make a new about-face in its strategy, developed solely by Iain McGeoch as chairman and chief executive. While the company continued to seek new store sites, these amounted to just six or seven during the year. Instead, Mackays announced its decision to convert the whole of its retail chain to the increasingly successful M&Co format. By 2006, the company had converted more than half of its 270 stores to the new formula, a process largely completed by 2007. The company had also reinforced its M&Co sales with the launch backed by its own e-commerce enabled web site during the year.
By 2007, Mackays was preparing for new expansion. The company targeted a new market, Northern Ireland, opening its first store there in Belfast's Laharna Retail Park. Mackays also moved to larger headquarters that year, from Paisley to nearby Inchinnan. The nearly 175-year-old company appeared to have found a new life for the new century.
Principal Divisions
M&Co.
Principal Competitors
NEXT plc; Arcadia Group Ltd.; Coats Holdings Ltd.; Burberry Group plc; New Look Group Ltd.; Top Shop/Top Man Ltd.; The Peacock Group plc; Monsoon plc; Ossian Retail Group Ltd.; H and M Hennes Ltd.; French Connection Group plc.
Further Reading
"Fashion Store First for Larne Retail Outlet," Belfast Telegraph, June 25, 2007.
Fields, Julia, "Mackays Adds 20 New Stores to Shopping List As Profits Rise," Sunday Herald, October 16, 2005.
Friedli, Douglas, "Mackays Chief Spends GBP 2m on Raising Stake," Scotland on Sunday, January 30, 2005, p. 1.
"Mackays Shake-up Paves Way to Market," Sunday Times, October 13, 1996, p. 2.
"Mackays Stores Profits Driven by M&Co and Fashionable Children," Scotsman, July 13, 2004, p. 23.
Nicholson, Mark, "Iain McGeoch Keeps Mackays in the Family," Financial Times, December 18, 2001, p. 27.
Rutherford, Hamish, "Mackays to Roll Out M&Co Rebranding Nationwide," Scotsman, July 22, 2006.
Smith, Stephen, "Exile for Store Boss After Divorce Payout," Daily Mail, April 8, 1997, p. 5.
Staples, John, "Tycoon Brothers Split Clothing Empire," Scotsman, December 18, 2001.
"Strategic Vision," Personnel Today, September 14, 2004, p. 32.
— M. L. Cohen
