The retailing world has dismissed Next's chief executive as a man in a grey suit. So how, asks Andrew Davidson, did a quiet, affable accountant engineer the dramatic turnaround of Next's ailing stores?
After all those years of being dismissed as the grey man of British retailing, perhaps David Jones of Next should stand and take a bow. At the end of the '80s this quiet, affable accountant walked to the brink with his company, looked over, contemplated the drop and barely blinked. Now Next's revival is being described as one of the turnarounds of the '90s. Yet most would still say, 'David Who?' Maybe Jones needs some personal PR. Well, he's 52, drives a Range Rover, likes a Montecristo No 1 cigar after lunch, spends his weekdays sharing a house in Leicester with other Next personnel, and weekends at home in Yorkshire where, it seems, he plays a lot of snooker and golf, Saturdays with his friends and Sundays with his wife. He also enjoys films, watches lots of sport on TV, counts a few rugby internationals among his mates and hates this kind of stuff.
Which might make you ask why he has consented to an interview? Because, he laughs, six years ago he was tickled when Management Today pictured him sitting in a flaming chair with the headline 'Life In The Hot Seat'. He doesn't go much for profile - look at the last annual report: no photos, 15 words on Jones in the list of directors - but thought, as we had asked, that we deserved an update. Now, the only danger to his seat is that it might wobble a bit as it is borne aloft by his growing band of admirers.
For, according to some City analysts, Next's fashion retail and mail-order business has not just been 'turned around', it has been rebuilt on such solid foundations that it could even become a serious rival to Marks & Spencer. This, remember, was the company which posted a pre-tax loss of £435 million in the year to 31 January 1991, and under its high profile founder George Davies had become a byword for reckless diversification in the '80s. (Anyone remember British Satellite Broadcasting, later gobbled up by Sky? Next invested £19.4 million in it and is still trying to get its money back.) But just look at Next now: stripped down to its basics of stores, mail order and a small credit management subsidiary (Club 24), its figures, by comparison, make startling reading. Pre-tax profit topped £107 million for 1995, sales per sq.ft in its 296 stores are now around £550 (they were £253 in 1991), and Next shares, down to 26p at the start of the '90s, are over £4 and rising at the time of writing.
So how much longer can Jones keep a low profile? When we met, Next had just been the subject of yet another rave notice in the City, this time from Robert Fleming Securities - 'Current action Buy, investment view Positive' - which had argued that the company would be joining the FTSE-100 Index and that its shares were at least 20% undervalued. All good for the share option schemes, which in Next plc stretch right down to the shop managers.
We sit in the Next first-floor boardroom at the company's head office near Leicester. Outside, through the long windows, rain is falling. Inside, lounging in shirtsleeves at the end of the boardroom table, Jones appears calmly bemused by the whole process of interview. Medium-height, slightly thick-set with a chubby, bespectacled face and a bit of weight at the waist, he looks less the fashion-store king and more the solid Rotarian type.
Hence, of course, the grey man image. You would have little difficulty spotting his grounding in accountancy, either, as he answers everything with a distinctive precision, peppering his conversation with exact dates and exact amounts. He has always had a facility for such things, he says, ever since his early days clerking for Kays, the large mail-order firm which had a base near his home-town of Worcester.
It was there that he started his business life. Before that he had an unremarkable upbringing. His father was a watchmaker, his mother a cook. He has one much older brother who joined the Navy at 15, so for 10 years, from the age of five onwards, Jones was virtually an only child. He attended King's School Worcester - the year below Geoff Mulcahy, now chairman of Kingfisher - and left with three 'not very good' A level passes.
tumped for what to do next and lacking either the inclination or the technical expertise to join his father's business, he turned up at Kays Mail Order, a Great Universal Stores subsidiary, looking for work. He had thought of joining a bank but then went off the idea. He remembers saying to his parents that if he could earn £4 a week clear after tax and national insurance then he would be happy. Now, of course, he earns £440,000 a year and is not begrudged a penny by the Next workforce whose jobs he has helped preserve.
The story of his rise - getting a toehold in the accounts department, grafting nights for his accountancy qualification by correspondence course, becoming finance director at 27, then assistant managing director, followed by a move to another GUS subsidiary in Manchester - appears to be one of stolid perseverance rather than flashy brilliance, but as with the man himself, appearances can be deceptive. He climbed the GUS ladder, ending up managing director of the biggest mail-order firm in Britain, but thought nothing of walking out for a rival, Grattan, in 1980, so strained were his relations with GUS boss Leonard Wolfson. He also took 25 people with him, a move that incensed Wolfson who tried to block it by legal action but failed. No stolidity there, you fancy.
What went wrong between him and Wolfson? 'Turn that off and I will tell you,' he smiles, gesturing at my tape recorder. He says little that is inflammatory but clearly found Wolfson's famously brusque manner too much to take. He has no problems working with other members of the GUS clan, remaining close to David Wolfson, Leonard's cousin, who is now Jones's chairman at Next. Together they are rated an effective team.
Still, it is not everyone who takes a football squad of people to work at a rival. What about company secrets? He says they didn't bring any knowledge with them that wasn't already freely exchanged between buyers in the trade fair bars. What they did bring, though, was crucial expertise in computer and warehouse systems. The Jones squad rapidly transformed Grattan which had lagged behind its rivals in modernising its systems. The effect was clear: when Jones joined Grattan its share price was on a slide that was to end at 32p. Six years later he sold the company to Next, in an arranged merger deal, for 540p a share.
How did they do it? He shrugs. 'Having worked for the best mail-order operator in the country for 20 years, we just had to sit down and duplicate what we had done there. We simply rewrote all the computer systems. It coincided with the early Thatcher period when life began to get more comfortable economically. We rode the crest of the wave and did very well.' ut surely Leonard Wolfson had every right to be furious? Jones smiles. 'He was not a happy boy,' he concedes, agreeing it would be pretty difficult now for a senior executive to leave Next with 25 staff. And according to others, it is testimony to Jones's closeness to his staff that so many were prepared to go with him. Michael Pickard, his chairman at Grattan and now chairman of the London Docklands Development Corporation, remembers that Jones always worked 'close to the coal face', bonding a tight team, working and socialising together.
'David's style is to have multiple relationships throughout the business at every level,' says Pickard. 'He would never work for a big, hierarchical organisations.' Then along came George. The merging of Grattan and George Davies's Next was in fact the idea of banker Roger Seelig, later to become famous as a Guinness trial defendant. He had been hired by Jones to find a high-street partner for the rapidly growing Grattan operation. 'We had got to a point where we couldn't advance any further, and we wanted to create a mail-order business linked to a valued high-street name,' says Jones. 'The first company we thought of was M&S, but it was already doing something with another company. Seelig said, "Why don't you meet George?'"
Jones and Davies met at Brown's Hotel in London and immediately hit it off. The two were chalk and cheese. Davies, the flamboyant marketing and design whizz, had devised the Next concept with Sir Terence Conran and used it transform the J Hepworth company into a major high-street name of the '80s; Jones, quiet, publicity-shy, a systems expert, had never set foot outside the distinctly unwhizzy confines of mail order. Yet they genuinely liked each other. Within a fortnight a deal was done, Next merging with Grattan by buying it up, and Jones installed as deputy chief executive under Davies at the new Next operation.
nd then Next got bigger and bigger until it finally went pop, along with the Jones and Davies friendship. Those in the City, fairly or unfairly, still link Next's problems with Davies's personality. 'He just seemed to go AWOL, buying everything in sight,' says one analyst who has followed the company since the dark days. 'But you have to remember Davies was an entrepreneur, and entrepreneurs are always blinkered to risk. They prosper in boom times, but you need good, able managers when times get tough.' Things came to a head in 1988. 'We had bought Combined English Stores and Dillons newsagents,' says Jones, 'then the recession started to bite. We had a big mail-order business, chemists, newsagents, jewellers, manufacturing in Belgium and Mauritius. The whole thing became almost out of control in my view.' So why didn't he stop it early on? 'Well, by the time I realised things were going wrong we had just announced our half-year results in 1988 and, to cut a long story sideways, George and I had a difference of opinion which gathered momentum,' he says. 'There was too much borrowing, rates were rising, we had a huge property portfolio losing value - it had got to the stage where George and I agreed we had to do something about it. I thought we had to contract, or we would go broke, and he thought we could trade out of it.
'I said I felt it was my duty to talk to the non-executive directors about it and he obviously talked to them as well - they were placed in a crisis situation and had to decide which horse to back.' Eventually the board agreed that Davies should go. He and his wife Liz, Next's product director, resigned, the company issued a profits warning, and Jones became chief executive.
Jones and Davies have not spoken to each other since, and indeed Davies, who now runs his own design company, declined to comment for this piece but it could be said that, in one way at least, his influence lingers on. Some believe Jones's insistence on a low profile is in many ways a reaction to all that happened at the company in the hype-heavy '80s.
Anyway, from 1988 Jones spent three years selling everything Davies had bought, until finally in 1991, caught on the back of a huge Eurobond repayment, he had to sell Grattan too - retaining Next Directory as the company's only mail-order interest. That hurt, but it allowed Next to make a fresh start.
'On 16 April, after we sold Grattan, I got everyone together and said, "Look, as far as I am concerned our life has now begun". David Wolfson was chairman by then and we sat down and said "What are the most important things we have to address"? The first thing was product, the second thing was to make our shops more inviting for people to come in, and the third was to do whatever we could to train our staff to be more helpful and knowledgeable about our products.' They concentrated on quality and value. The recovery, he says, was as simple as that.
But how close was Next to going under? The answer is probably not as close as some observers thought at the time. There were leaks about Next's 'crisis meetings' with its banks and doom-laden scenarios in the press, but the core of the business was still healthy. The problem was that, as one of the iconic success stories of the '80s boom, it fitted easily as an apt symbol of the crash, and hence, perhaps, was given an exaggerated sense of its own demise.
But perceptions are important, and David Wolfson, chairman of Next, says that Jones's ability to keep staff motivated and enthusiastic throughout the downturn was crucial to Next's recovery. 'The thing is, he managed to remain so cheerful throughout the adversity, and you need people to remain cheerful especially in a customer-service operation.' ndeed, Jones has emerged as a formidable motivator. It is no coincidence that at Next share options are not just a director's perk, but stretch to cover nearly a quarter of the workforce (600 on an executive share-option scheme and 2,000 on a 'sharesave' scheme). Jones was horrified at the Chancellor's decision to end tax breaks for option benefits earlier this year. 'Unbelievable,' he says, shaking his head, still clearly annoyed by it.
So back to basics with a sunny disposition and a stake in success? It's a good description of the Jones' style, as he has proved a shrewd unraveller of the complications of the retail market. It is fair to say he has surprised many people who thought his expertise was figures and systems. 'Yes, I suppose I am a bit surprised,' says Pickard. 'David's skills were oriented around being a good man-manager and being bright at how you can use computers in a mail-order company.' Jones himself laughs it off and says he realised early on that, whatever others say, retail is really just common sense. But is it? Surely it involves some degree of flair? David Wolfson backs him up. 'Retail is detail, and David is very good good at mastering that.' 'I will tell you a story,' says Jones. 'We had a window-display man who was setting up one of our mock-shops downstairs. In one of the displays he put a six-foot long green fish. I wasn't quite sure why we had a fish in the window so I asked him. And he said you had to have something in the window that makes people stop and look and want to go in. I said, "That's fine, but we don't sell fish", and then we had a rather funny conversation and one or two people patted me on the head and said, "Look, you're only an accountant and a mail-order person. You don't understand retail."
'So I decided I had better start understanding the business and after spending a lot of time in the stores I came to the conclusion, helped by the chairman, that we were making things much too complicated.' He gives me an example: at one stage Next had three different formats and lines of clothing: Next Collection, Next Too and Next Originals. No one, certainly not customers, he says, had any clear idea what the differences were. So he moved it all back into one format.
Likewise, he pushed the philosophy through into Next Directory, implementing a common product strategy between the retail and mail-order arms. Up until then it had been assumed that if you sold the same thing through both, one would just cannibalise the sales of the other. They didn't and, according to some, Jones's initiative has turned conventional mail-order thinking on its head. Although providing only 20% of turnover (£126 million out of £652 million) Next Directory sales are growing at 27% this year, almost twice the rate of the retail arm, says Jones. It will never overtake retail, he adds with a twinkle, but it will get closer.
It does make you wonder if he still hankers for the old business. Mail order has always been a less glamourous trade than retail, though the current boom in American-style clothes catalogues, aimed at affluent thirty-somethings, may change that. Does he think Next staff still see him as a mail-order man? 'No,' he says, looking perplexed, 'I don't believe that.' It is true, though, that he positively lights up when talking about the intricacies of the mail-order business. The boardroom - rather unusually for a major plc - is full of rivals' products, in this case mainly catalogues from America. When I tell him my wife has bought clothes from Racing Green in the past, he positively thrusts Next's new, similarly-styled 'specialogues' into my hand and insists that I make her compare the prices. 'Let me know,' he says with genuine earnestness, 'what she thinks'.
But that's his style. He lives, eats and drinks the business. 'I couldn't do it,' says another who has worked with him, 'his business and social lives are totally interwoven.' Not quite true, says Jones, as staying during the week in Leicester, then returning home at weekends, does enable him to separate them more.
But sharing a house with fellow executives? 'It works out. My children have grown up. It means I can have a selfish life, thinking only about work when I am here.' Who stays there? 'Oh, people who live in London but work up here and some of the people who have worked with me for some time who still live in Yorkshire. It's good. Last night we had a barbecue and invited lots of people. We all get on pretty well together.' Those who do live there are known within the company as the 'Red House mafia', he laughs.
or the future there is expansion overseas - Next has four shops in America and one in France, where it sees 'big opportunities' - and at home steady growth in shop space and in relatively new product areas like fabrics and furnishings (Next Interiors), shoes, jewellery, watches, grooming products. He wants to get a wider age range into Next stores, and is conscious there is still a hangover from its '80s brash, yuppy image.
He cites a speech which he gave at a recent Rotary Club dinner for local business executives. He asked them: 'Who here shops at Next?' Not one hand went up. So he wheeled in a load of men's merchandise and made them inspect it. 'They were surprised,' he says. 'They had this vision of Next just being full of double-breasted, baggy suits for 25-year-old men. It isn't.' The target customer, he says, is everyone between 17 and 70.
Sound familiar? When I ask him if Next wants to be the M&S of the 21st century he smiles and shuffles his feet a bit, admitting there is still some way to go.
'I would certainly be delighted if Next had the reputation that M&S has,' says Jones. 'But we've only got 3% of the market. Our challenge now is just to continue being successful.'
1943 Born 2 February, Malvern, Worcester Educated King's school, Worcester
1960 Clerk, Kays Mail Order
1970 Finance director, Kays
1976 Assistant managing director, Kays
1977 Managing director, British Mail Order Corporation
1980 Chief executive of Grattan
1986 Sells Grattan to Next and becomes deputy chief executive of Next
1988 Chief executive of Next
What people say
'I was another of the grey accountants from Bradford and, I have to say, I was a bit annoyed about all the grey man stuff about David. It was all bullshit really. With the correct team around him he was always an excellent manager.'
Peter Lomas, Finance director, Grattan
'He is very good at mastering detail, motivating and managing people and creating an organisation that is enthusiastic. He has kept a low profile simply because there was an awful lot of work to do here putting the business right.'
Lord David Wolfson, Chairman of Next
'David's great strength is that he keeps very close to the coal face. His management style is to have multiple relationships throughout the business and he is good at picking the right people to work with him.' Michael Pickard, Jones's former chairman at Grattan, now chairman of the London Docklands Development Corporation
'Jones is not an actor.
He does care about his people and the interesting thing about both he and Wolfson is that they are not great trumpet blowers. Yet Next's recovery is quite exceptional and it really does have the potential to take on some of M&S's qualities.'
Ray Bowden, analyst, Robert Fleming Securities.