A man of style: ThePost.ie


TCH Archives > Sunday Business Post > 2004/11/14 > A man of style

A man of style
Sunday, November 14, 2004
By Ian Kehoe
Andrew Sharkey was faced with a dilemma when Tesco announced in July 1997 that it was offloading Lifestyle Sports, the sportswear arm of the Quinnsworth supermarket chain.Tesco had just acquired Crazy Prices, Stewarts and Quinnsworth for more than €900 million and sportswear did not form part of its business strategy.

As director of all non-food business for Quinnsworth, Sharkey was responsible for running the sports chain and the announcement meant his job was being eroded. He had a simple choice: jump ship before being pushed or try to buy the boat.

Sharkey chose the latter option and put together a €19 million management buyout (MBO) plan. He recruited four other directors, secured funding from ACT Venture Capital and set about negotiating a deal with the British supermarket giant.

"The whole thing took three months to complete," said Sharkey. "Tesco received initial approaches from about 20 companies and we did not know until the very end if we had been successful. It was touch and go. It really was a very stressful and a very difficult time."

Lifestyle had 49 outlets and sales of €44 million. However, many of the shops needed major renovation and the brand was suffering from a serious image problem. Due to its supermarket origins, Lifestyle had become synonymous with the weekly grocery shop.

"We had to build a new brand. We had to aim at a younger audience. In the old days, Lifestyle was an add-on to the housewife's shop. That is not the sort of image you want to create for a sports shop. We had to do something about it," said Sharkey.

Before he could cultivate a new brand, Sharkey first had to establish a new company structure. As the consortium had purchased a portion of an overall company, the new management had to acquire headquarters, an IT framework and a distribution centre.

"It was like starting from scratch," he said. "We didn't even have an office when the MBO was completed. Everything was contingent on doing the deal.

"Immediately after the deal was signed, it was a lot of hard work to set up the structures of a whole organisation."

Sharkey was ideally placed to get the company operational. He had been involved in the retail business since he left school and had worked for the Elverys sports chain for almost ten years.

As one of Quinnsworth's directors, he was responsible for the everything from hardware to sportswear - a sector that had annual sales of about €150 million.

Despite its pedigree, the company spluttered through its first two years. It was forced to spend vast sums of money renovating stores.

Meanwhile, the market was becoming much more competitive and the group was still trying to get the right distribution and IT systems in place.

"We were lucky to survive," he said. "It sounds rather bad to say it now, but we really were. Our key goal was survival. Retail is capital intensive.

"There is a constant refurbishment process and a constant upgrading of stores.

"It's cash hungry. Luckily, our backers had confidence in us and we were able to pull through it. After that, it was progressing and increasing the number of outlets and really driving the company forward."

After its initial difficulties, the group has cemented its position as a major player in the sports and leisure retail sector.

Sharkey said the group had sales of €135 million for the past year, with an operating profit of €6.5 million.

Lifestyle has 65 shops throughout Ireland,14 of them in the North. Within four years, the plan is to increase the number of outlets to 80 and generate sales of €200million.The company also plans to grow by about 10 per cent a year, according to Sharkey.

"We've built a very solid business," he said. "We've reinvested our income into growing the business and the brand. We've built up what is a major retail business in Ireland and we have grown and developed a very worthwhile company.

"When we had the MBO, the objective was to grow the company rather than extract money from it on an ongoing basis. We have not paid out any dividends yet. We have ploughed the money back in."

Sharkey said the management of the firm had just increased its stake in the company to 60 per cent; the team held 30 per cent when the MBO was first completed.

The other internal investors in Lifestyle are former Quinnsworth executive Andrew Towell, former Shamrock Rovers footballer Harry Kenny and accountant Tony McEntee.

"We are focused onthe business. Management has a stake in it but that is not the most important thing," said Sharkey.

"To be honest, the stake becomes a side issue. When you are in doing your job, the fact that you own a percentage of the company does not matter.

"You are still focused on doing the job well. It is running a business. The fact that shareholders are running the business is beside the point. It's an added bonus."

Sharkey said the sports market was "difficult internationally'' but that all his outlets were generating a profit. The market in the North was "much tougher'' than in the Republic, due to increased competition and more shops per head of population.

Earlier this year, US multinational sports chain Foot Locker entered the Irish market, following its acquisition of 11 outlets owned by Champion Sports. However, Sharkey said the move would not affect Lifestyle's future growth "in any real way''.

"Major international retailers have come into Ireland and they are all faced with the same cost structures as the local operators. As an efficient local operator, we feel we can compete with international retailers," he said.

"We compete on price.

"Look at our profits, they are not enormous. We have to sell some products at uneconomic prices in order to compete, but we do compete and we continue to improve our performance."

Sharkey said the replica market for soccer, rugby and GAA jerseys was one of the biggest parts of the business. The market for European football strips and county GAA shirts has really expanded in recent years.

The footwear and ladies clothing market was "also extremely strong'', he said.

"It is important that we have the right stock. Our challenge is distilling the product that suits our customers. We are customer-focused. We are not on a mission to make the customer buy anything. Our mission is to satisfy customer needs. Once we give customers what they want, the market will remain buoyant," he said.

Sharkey said the group spent 2 per cent of its annual turnover on marketing and advertising.

One of the firm's earliest television commercials featured a young and unknown Sienna Miller, girlfriend of movie star Jude Law, as Cinderella. Of course, in the place of the glass slipper, the ad featured a fashionable trainer.

"Obviously she has gone on to other things but we did give her a break," said Sharkey.

Aside from ensuring he had a job, Sharkey said the main benefit of the MBO was the satisfaction that comes with ultimate responsibility.

"It is a more complete management job - you have to manage all aspects of the business. It is more complete and fulfilling," he said. "I love what I do. I don't know what else I could do. "I certainly couldn't retire. I'd get bored too easily."