UK: THE DAVIDSON INTERVIEW - SIR GRAHAM KIRKHAM. - Ludicrously generous interest-free credit deals, a manufacturing margin and good staff relations are major factors behind DFS's runaway success. If there's more to it than this, says Andrew Davidson, the

Last Updated: 31 Aug 2010

Ludicrously generous interest-free credit deals, a manufacturing margin and good staff relations are major factors behind DFS's runaway success. If there's more to it than this, says Andrew Davidson, the company's supposedly upfront boss isn't telling.

Sir Graham Kirkham is late. 'I'm sorry, I'm sorry, the traffic was a mile long, I've been sitting there for an hour, it's not like me, I hate being late,' says the Sofa King as he bustles into the foyer of his public relations company. Then he winks. 'Actually it's not true at all, I just got up late. Ha ha ha!'

He's joking, I think, but sometimes it's hard to tell with the 51-year-old DFS boss. He is such a performer. Walking straight into the photo shoot for this interview, sitting on a rather nice squidgy leather chair, the bulky Yorkshireman swiftly attracts a small audience as he launches into a practised comic patter.

'This is Graham Kirkham answering questions on Winston Churchill,' he starts in stentorian tones, before addressing the photographer. 'You may have noticed that, from certain angles, I am slightly overweight ... Where do I take my clothes off? ... Yes, it's true, Michael Ashcroft did drop his trousers at a recent garden party ...'

And so it goes on. By the time the shoot's over, and he has plonked himself down at a table in an adjacent meeting room, you could imagine him wet with the sweaty afterglow of a comedian coming off stage. But he's not.

He's still performing, cracking jokes, and looking as cool as a rather plump cucumber. People in the City are always rather disappointed when they meet him, he says modestly, because they expect there to be some complicated genius behind his furniture stores' success. There isn't.

He's just your 'absolutely bog-standard, straightforward guy' (his words, in a deep Yorkshire accent), and his success is all about graft, caution and knowing his customers.

Well, maybe. But you can tell from his sharp little eyes, which watch you warily from his chubby, grinning face, that his outgoing nature conceals a tougher core.

At times he's needed it. Kirkham, the miner's-son-turned-multimillionaire, hit the headlines last year as the northern tycoon who bailed out the Conservative party's overdraft with a £4 million loan and then received a knighthood at Christmas for his services to charity. The Government and Kirkham were subsequently shredded by the Opposition in Parliament.

'Despite the reasons given for the knighthood, this looks like the crudest example yet of honours being given for financial services to the Tory party,' said a statement from Labour. The only visible effect on Kirkham's 32-store furniture chain was for the publicity to boost its share price even higher. At the time of writing it stands at 581p, nearly double what it was a year ago. As many in the City acknowledge, DFS's last reported results - interim profits up 16% to £15 million in the six months to January 1996 on sales up 19% to £87.7 million were good, but that good?

Perhaps it's the way Kirkham has made his fortune (he and his family now stand at number 43 in the Sunday Times' 'Britain's Richest 500' list with around £300 million). Kirkham has spent 27 years quietly building his store chain in the North and Midlands, and proudly claims never to have borrowed any money in doing so. He only floated on the stock market three years ago because he thought it would be good to motivate his managers - it makes them feel they are working for a company that is going places, he says - and to cash in some of his shares. He maintains the opportunities for growth funded by cashflow are still large. He wants to have 100 stores by 2006, which he says is quite feasible as DFS's national market share (in sales of upholstered furniture) is still only 8%.

And his retail concept really does look very simple. DFS is vertically integrated - it makes around a sixth of the furniture it sells, enough, as one adviser puts it, for it to know the real price of a piece of cloth - and concentrates mainly on selling armchairs, sofas and settees from large, out-of-town sites to a lower to mid-market crowd. It markets aggressively on price, has long been a master in providing innovative credit deals for customers, but has always had a reputation for quality and service that Kirkham believes translates into innumerable word-of-mouth recommendations. Most of all, Kirkham puts profit and careful growth before all else. That's probably why the City loves him. 'I don't mind where our share price is,' he says, 'so long as it doesn't relate to a level of expectation I can't fulfil. There is no ambiguity about our aims. We want to grow at a compound rate of 15% per annum. This is not a firecracker situation.'

Maybe not to Kirkham, but it's remarkable growth to others who have found the retail market tough-going in recent years, especially as DFS seems to have crept up from nowhere. Kirkham can't, it seems, do any wrong.

Even when he sold a further large tranche of the family's holding in DFS last year, the share price didn't dip, it leapt. All in all, he has cashed in over £200m worth of DFS shares (he and his children still own around 30% of the company), money which he uses to indulge his hobby, collecting fine art. He even managed to get himself paid in art and antiques in the days when DFS was a private company, a move which, he says rather sheepishly, was recommended by his accountant. Not quite your bog-standard bloke, then, but nor is he your silk-hatted, Bradford millionaire of legend.

He is far too affable for that.

He is based in Doncaster, 30 miles south-east of Leeds, and a location blessed, he assures me, with one of the best rail links in the country.

He was brought up in a Yorkshire mining village and, although he now has a rather grand eight-bedroom house which he and his wife have been doing up for six years - they haven't quite moved in yet as he is, he says, a great one for procrastination - he is keen to stay close to his roots.

Not that close, of course, as his support for the Conservative party makes plain, but close enough for many to feel that DFS's move into London and the South East will be a real test for his retail nous. He already has two stores open in Sidcup and New Malden, has identified four more sites, and hopes eventually to get 10 in the area.

He doesn't think he will sell anything different. His policy is, as ever, just to stick to retailing basics. 'Whoever the customer is, they like good service, they like you delivering on time and they like value for money.' He speaks with a boyish enthusiasm which sweeps you along, yet also with a practised ease - no doubt a testament to all those City meetings he has had to sit through since floating DFS. Underlying everything is the message best summed up by his favourite word: straightforward. Straightforward business, straightforward man ...

But the product? To have sold so many armchairs and sofas he must be pretty adept at anticipating taste? Nothing straightforward about that.

He shrugs. For too many years, he says, manufacturers have forced product on retailers who have then tried to force it onto customers. 'What we have done is stand back - and combining manufacturing and retailing has helped us do this - and listen to what the public wants. I'm not concerned with influencing their ideas.'

The big change since he started, he says, is that sofas, settees and chairs are no longer a distress purchase. They are a fashion purchase.

You buy a new one for looks, not because the old one has the springs poking out of it, and that opens up new possibilities for retailers. All you need to do is get the customers into your stores, hence DFS's brash advertising (his summer television campaign down south features Michael Aspel, a helicopter and lots of aerial shots of his new premises). Concentrating on brash glitz and price, he says, lowers peoples' expectations of what they will find before they come to a store. That works in his favour as, according to his logic, customers are then pleasantly surprised by what they find: spacious modern stores, elegant set-piece displays. He denies the ads put off more affluent customers, arguing that they like a bargain as much as anyone else. Most people find this hard to understand but the financial results speak for themselves.

If it's so simple, why isn't Britain full of big, brash, successful furniture chains? Because, says Kirkham, no one implements the concept as well as DFS. Certainly no one squeezes the margins like Kirkham. 'He gets that half a per cent which others don't,' says one friend. Nor can many match his extraordinarily generous, interest-free credit deals. How does he do it? Volume and a manufacturing margin on top, according to industry experts. His team is well motivated, his salesroom staff are highly paid, his company is focused - no diversification in products and no expansion into Europe. And the focus is simply on profit.

'All the business books I have ever read say that you have got to be good at providing the product and the service and the value and that is where the focus is,' says Kirkham. 'Well, it has never been my focus.

Our aim is to earn money, it is the be-all and end-all. And our way of doing it is by giving good service, by looking after the customer, caring about the staff and caring about our external suppliers.'

If that makes him sound like an odd cross between Anita Roddick and Lord Hanson, those who know him well are quick to point out that his are not necessarily contradictory values. 'In today's environment maybe you don't see them together too much,' says Roderick Walmsley, managing director of Forward Trust Personal Finance, which provides DFS's customer credit offers. 'Everyone's talking about flatter structures and downsizing, but it's worth noting that Graham's values have seen him through tough economic times when his company has grown.'

Others ascribe Kirkham's success to his being brought up an only child in a poor family in the tight-knit mining village of Edlington. Kirkham himself is rather ambivalent about this argument. He points out that, with only one child to feed and clothe, his family were probably rather better off than a lot of others in the village. Certainly his father, who was also the local verger, had no ambitions for his boy to go down the mines. All Kirkham wanted to do was join the RAF and fly. He did well academically, getting into the local grammar school but then proceeded to lose interest in work, scuppering his chances of getting into officer training college and becoming a pilot. 'I thought I would get something on natural ability,' he says, 'but I never got anything at all.' If his parents were disappointed, he says, they didn't show it, they always backed their boy to the hilt.

He left school at 16 without any O levels or a clue as to what he should do next. Eventually he saw an ad for a job as a furniture salesman at a furniture store called Hardy's (now owned by Sir Philip Harris). He stayed three years, long enough, he says, to note that progress was made strictly through 'dead mens' shoes'. There he met a self-employed carpet-fitter who taught him the tricks of his trade. It was the fitter's Jaguar car which impressed him. Kirkham had some reply-paid cards printed - 'do tick this box if you are interested in having a quote for new carpets' - got carpet pattern books from a wholesaler, pushed the cards through some letterboxes, got some responses and he was off. Yes, he admits, it was in the same area worked by his friend in the Jaguar but they didn't fall out. He came to work for Kirkham later.

That start led him to take on more people as agents, then to look for his own premises. All he could find was an old snooker hall, so he took it, put a machinist upstairs to make furnishings and learnt the furniture business slowly. He opened another store five years later but didn't start expanding properly till 1983, when he changed the name of his company from Northern Upholstery to DFS, a firm he bought from the receivers.

What drove him on? 'I think he got the smell of the hunt,' says Eric Worrall, deputy director of the Duke of Edinburgh Award and a close friend of Kirkham's.

'He enjoyed it and he knew exactly what he was going for.' Kirkham himself says he had a number of helpful mentors (in particular, George Moore, another Yorkshire furniture tycoon, who was instrumental in bringing the DFS boss down to the City). Kirkham was also a good learner, something that goes back to his schooldays. 'My reports used to say: "Graham always wants to know more".' He stops as he tells me that, then adds contemplatively: 'You know, what worries me about where I am today is that while I'm talking to you I'm aware of the dangers of talking. I used to listen a tremendous amount, and now I find that I talk a lot instead.'

At which point he embarks on an extraordinary digression. He is, he admits, whatever his outward appearance, very uncomfortable about being asked about his success. 'I don't want to tell your readers how I made it,' he says. 'One of the secrets of my success is that, if there are any secrets, the last thing we are going to do is tell anybody. That is one of the difficulties of taking the decision to float. To tell the shareholders enough to make them want to invest, but not to tell them so much we damaged ourselves commercially.' That's why, he says, he always tells his staff to lie to the competition if they ever come into his stores trying to find out what's selling.

But what about integrity? He smiles, leans forward and waggles his eyebrows.

'What was that word you mentioned? We're talking about business here.

Ah, integrity. I know what it means, but most people I come across don't know what it means. They pretend they do ...' Then, slumping back in his chair, he mutters: 'I know when I read this I'll regret my honesty.'

Perhaps. But Kirkham is nothing if not a man of pleasing contradictions.

Up to now, he has put together his chain of shops with the slow patience of a fussy stamp collector, quite the opposite of his exuberant exterior.

And one of the bedrocks of his success has been his easy credit deals for customers, even though he abhors the idea of borrowing himself. He once had a small mortgage, but anything else ...

'I have never borrowed anything, ever,' he says forcefully. 'We have used the banks of course, and, more than that, been great interest receivers, rather than interest payers, but we have always had the cash. It's something to do with my background, I think. We weren't mean with money but we had to be frugal.'

But if everyone followed Kirkham's dictum, there would be no DFS, or at least, a rather smaller DFS. Surely he would acknowledge that sometimes the returns can be greater if you borrow and acquire now, rather than save and acquire later? He thinks about it. 'Perhaps I am not totally right in my view and you are not totally right in your view. What I have learnt is that there are many different routes to the same end in business.

I see people with completely different attitudes to staff to me - they treat their staff like crap. But they're incredibly successful. They run their businesses in a way that suits them. It suits my style not to borrow but to grow at a level that makes me feel comfortable.'

It's all part of his keep-it-simple philosophy. In fact, he says, he doesn't even see himself as a businessman. 'I know all about running businesses but I can't talk to people about balance sheets.' What he is, he continues, is a good marketer, good at finding out what the customer wants, and flogging them the benefits of DFS. He is also, of course, pretty good at marketing himself to others, even if he does package himself as something he is not: blunt, basic, with no time for arty-farty stuff (apart from what he can hang on his walls, of course). 'If I'm a twat, tell me!' he laughs.

'If you don't tell me I won't know!' Very Yorkshire. It is a brilliant negotiating ploy, as those who have done business with him testify. You like him so much he runs rings round you. His friends say the real Kirkham is rather different: cautious, considerate, driven and, most importantly, incredibly disciplined.

Yet if he is cautious how did he end up entangled in the fuss over his huge loan to the Conservative party last year? Kirkham looks a little uncomfortable. The problem, he says, was that the story of the £4 million loan was untrue, but he was advised (by his PR company, Dewe Rogerson) that denying it would only give the story more legs. What kind of advice was that? The sum of £4 million is a lot of money not to deny. So will he put the record straight?

'Yes. Graham Kirkham has never lent money to the Conservative party.

I have subsequently given but not in those volumes,' he says, stiffly.

His politics, he adds, are 'dead straight': he likes top rate tax at 40% and hates the idea of a wealth tax. 'I think if everyone in the country votes for the party that does them the most good, the party will end up in power that will do the most people the most good. I think the Conservatives will do me and the business and the people who work for the business the most good, so I support them.' He adds that there have also been donations from his children - a grown-up son and daughter who are big DFS shareholders and hence, presumably, not great fans of a wealth tax themselves - but that these hardly amount to millions of pounds.

It does appear that Kirkham has been rather badly served by this episode.

He is, by all accounts, a generous benefactor and a tireless worker for charity (specifically the Duke of Edinburgh's Award and the Animal Health Trust). The problem, says his friend Worrall, is that the Yorkshireman just doesn't care what other people think. He gets on with his life.

Yet it seems strange not to tell everyone the loan story was rubbish, especially when it ends up with half the nation believing you have bought your knighthood. Kirkham is meticulous. He always takes advice on areas he is uncertain of. With his art, for instance - he collects 'from Holbein to the Impressionists' - he only buys when given the go-ahead by his own informal advisory panel that includes a university professor, a restorer and a dealer. He has only talked to me, he says, because his PR people say it is good for DFS's profile. Was he perhaps rather ill-advised in his dealings with the Conservatives?

If he was, he's not admitting it. And anyway, he wants to go. 'You've wiped me out,' says Kirkham with a grin. 'I'm sorry I was late. It's not my style. That's why I have given you my best shot.' And with that he bustles cheerily off, his affability too good a defence to penetrate.

Which is probably how he likes it.

Biographical Notes

1944 - Born 14 December, Doncaster

Educated Maltby Grammar School

1961 - Joins Hardy's furniture shop

1968 - Sets up Northern Upholstery

1983 - Buys DFS Furniture from receiver

1993 - Floats DFS on the Stock Exchange

1995 - Knighted in the New Year's honours list

What People Say

'I think he is one of the best in British business. He has got a very deep intelligence, he is a tremendous lateral thinker and he assesses personalities brilliantly.'

Eric Worrall, deputy director of the Duke of Edinburgh Award and a close friend of Kirkham's

'Graham's personality is very straightforward. In everything he does, the key is preparation, and he is always into creating value: giving good value to the customers, to his staff and to the numerous suppliers who work with him.'

Roderick Walmsley, managing director of Forward Trust Personal Finance, which provides DFS's customer credit offers

'I think one of the things that makes him tick is that he loves the way he can motivate people, and he's extremely good at it. He remembers names, he's got a word for everyone and he makes people feel good. Everyone likes working with him.'

Alan Jacobs, assistant director, Schroders

'This looks like the crudest example yet of an honour being given for financial services to the Tory party.'

John Prescott, deputy leader of the Labour party, on Kirkham's knighthood.

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