Littlewoods plc

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Littlewoods plc

Sir John Moores Building
100 Old Hall Street
Liverpool, Merseyside L70 1DX
United Kingdom
Telephone: (0151) 235 2222
Fax: (0151) 235 2319
Web site: http://www.littlewoods.co.uk

Private Company
Incorporated: 1923 as Littlewoods Pools
Employees: 25,000
Sales: £1.89 billion ($3.45 billion) (2001)
NAIC: 452110 Department Stores; 452990 All Other General Merchandise Stores; 454110 Electronic Shopping and Mail-Order Houses

Littlewoods plc, formerly known as Littlewoods Organisation PLC, is the largest privately owned family company in the United Kingdom, with shareholders’ investment valued at £998.3 million. It was started in Liverpool in 1923 as a football (soccer) pool business by John Moores and two partners, all of them then full-time employees of a telegraph company in that city. The name Littlewoods Pools was chosen to conceal their involvement from their employers. After a loss-making first season the other two withdrew, but Moores held on, assisted by other members of his family and, in particular, by his brother Cecil, who joined the business. John Moores entered retailing in 1932 with a mail-order business and in 1937 opened the first Littlewoods chain store. The three businesses prospered. Two more were started in 1985 after Sir John Moores (he was knighted in 1972) had called in non-family executives to take over the day-to-day management of the firm.

By 2001, the company operated 118 Littlewoods stores offering a wide variety of clothing and household products; 181 Littlewoods Index catalog shops, 99 of which were located within Littlewoods stores; and 24 Littlewoods Discount stores featuring a wide range of quality merchandise at discount prices. In addition to being the fourth largest clothing retailer in the United Kingdom and the fifth largest nonfood retailer, Littlewoods was also the second largest home shopping company in the country through its operation of such catalogs as Littlewoods, Janet Fraser, Burlington, Peter Craig, John Moores, and Littlewoods Extra. The company was also involved in Internet retailing through e-commerce sites. The company participates in two joint ventures: in partnership with Granada Media Group, Littlewoods operates Shop!, a television home shopping channel; while Littlewoods Personal Finance, a venture with Woolwich plc, offers a wide range of financial services to Littlewoods’ customer base. By late 2001, the concern was still wholly owned by members of the Moores family, though Sir John Moores had died in September 1993 at age 97.

Football Pools Kickoff

In and after the 1920s, with large corporations already starting to dominate the British economy, promising niches offering opportunities for rapid growth from ploughed-back profit were relatively rare for those lacking capital. That John Moores hit upon football pools at the beginning of the 1923–24 playing season was a most timely stroke of good fortune. The Cup Final, held at Wembley for the first time earlier that year, had drawn much attention to Association Football, which soon developed into a well-supported working-class spectator sport on Saturdays and a topic of conversation for the rest of the week. Wage earners’ disposable incomes, though still small, grew rapidly in those years, and a business that gave them an opportunity to place small bets did not have difficulty in attracting some of this surplus. Sales of betting coupons in the form of postal orders reached unprecedented heights as a normally weekend sport became an even more popular weekday pastime offering the chance of winning more than even the most thrifty wage earner could ever hope to save in a lifetime: £13,000 was laid out on a penny bet in one instance during the 1930s.

John Moores was born at Eccles near Manchester in January 1896, the eldest of four sons in a family eventually to number eight children. He left school at 14 to work as a messenger boy at the Manchester Post Office but was soon accepted in a course at the Post Office School of Telegraphy. This enabled him, in 1912, at 16 years of age, to join the Commercial Cable Company as a junior operator. After World War I, in which he served as a wireless operator in the Royal Navy, he rejoined Commercial Cable and in 1921 was transferred from Liverpool to Waterville, the company’s base near the southwest tip of Ireland, where he started a private business on the side supplying goods to company colleagues and to the local golf club. Transferred back to Liverpool, he tried again to start his own business, this time with two partners and the idea of a football pool.

Moores and his two partners, Colin Askham and Bill Hughes, entered the business when there was only one small, struggling competitor and little capital was needed—each partner put in £50 originally and later another £50. Having weathered unprofitable beginnings, Littlewoods Pools emerged as a clear market leader because of its organizational skill and attention to detail in the regular dispatch of coupons early each week, careful checking of the results after the Saturday matches, and the handling of an increasing number of small payments. Growth needed to be at a pace to fund the all-important promotional expenditure required, but overhead was relatively cheap: no prestigious high-street premises were required for a postal business.

Expanding into Home Shopping and Retailing in the 1930s

Football pools appealed mainly to men. To appeal to women, Littlewoods Mail Order Stores were begun in January 1932 when Great Universal Stores (GUS), an established mailorder business in nearby Manchester, was in trouble. Britain was soon to start climbing out of the deepest trough of depression—again the timing was right—and Moores offered an element of chance in a venture aimed mainly at working-class women who were prepared to invest a small cash sum each week to buy goods for themselves or their families. This was a logical diversification of the existing business. Besides taking advantage of Littlewoods’ already familiar household name, it also built upon the organization and experience gained in postal pools and on John Moores’s earlier experience of direct selling in Ireland. Again, nothing was spent on retail outlets, for the business, like GUS, operated on the club principle whereby the many local organizers, working from their own homes, recruited others nearby who paid a small weekly installment in cash for goods shown in a catalog. A £1 club, for instance, consisted of 20 members who each paid a shilling a week. A weekly draw provided the element of luck, the first winner securing her purchases at once and the others in their turn. There were also £2 and £3 clubs on the same principle. The first catalog ran to 167 pages. The initial cost of launching what was to become an extremely successful enterprise was £20,000.

Moores’s venture into chain-store retailing in the mid-1930s was well-timed, too, for the British economy was moving up to a prosperous peak in 1937. Real earnings were growing fast and unemployment was falling. Entering chain-store retailing was a further logical step that took advantage of buying experience and contacts gained in the mail-order business; but this time it did involve costly high-street premises and competition with well-established chain stores, notably Woolworth and Marks & Spencer, which also offered competitively priced goods. The new stores, however, could depend not only upon the familiar Littlewoods name but also on providing basic and serviceable goods at fair prices without undue regard for passing fashion. The first store was opened in Blackpool, Britain’s most popular working-class holiday resort, in 1937. By 1939, 24 stores had been opened in various parts of the country.

By then the Moores family had already amassed considerable financial strength. A new building, situated on the outskirts of Liverpool as its Pools headquarters, became the postal censorship center during World War II. Other premises—there were 16 by 1944—produced barrage balloons, parachutes, rubber dinghies, and Wellington bomber fuselages, as well as 12 million shells and six million fuses.

Steady Growth from the 1950s Through the Early 1990s

Immediately after the war the renovation of the stores and the building of new ones were made difficult by building controls. Soon, however, shoppers’ habits and tastes were changed by what came to be called the retailing revolution, in which vastly increased purchasing power necessitated a leap in demand for consumer durables, including automobiles. There were nevertheless 52 Littlewoods stores in operation by 1952, more than twice as many as there had been in 1939, 70 by the mid-1960s, 108 in 1984, and 122 in 1990. They were located throughout the United Kingdom, from Belfast to Norwich and from Inverness to Truro, and sold clothing, household goods, food, wines, and spirits; most also had restaurants. Over a third of mothers with young children were said to shop there at least once a month.

In 1953 John Moores, quick to recognize the advent of the credit-buying society, launched Brian Mills, a company based in Sunderland, which supplied goods to customers before any payment was made. Not surprisingly, this made the older club method of mail-order less popular. A second credit mail-order firm, Burlington, also based in Sunderland, was added in 1958 and a third, Littlewoods Warehouses, Liverpool, in 1960, the year after the original business had been renamed the John Moores Home Shopping Service. A fifth credit company, Janet Frazer, was opened in Sunderland in 1964 and a sixth, Peter Craig, followed in 1968.

Company Perspectives:

Littlewoods’ vision is to become “the UK’s most admired consumer business .

When he retired from the chairmanship in 1982, Sir John Moores brought in as his successor the first non-family chairman, John Clement, from the dairy business Unigate. Clement, in his turn, recruited as group chief executive Desmond Pitcher, a Liverpudlian and high-tech communications expert, a former employee of Plessey. The corporate board in 1990 was comprised of Sir John, his four children, and other non-family members. Some of Sir John Moores’s and Cecil Moores’s grandchildren sat on the divisional boards. The new regime reorganized Littlewoods’ finances and in 1985 started Index, a catalog shop operation that later became a separate division. By 1990 there were already 50 of these shops within existing Littlewoods chain stores and a further 46 on their own sites. The second new venture, also started in 1985, was Credit and Data Marketing Services (CDMS), a credit and information business that operated in retail finance, financial services—mainly general insurance—and marketing. A property company, Centreville Estates, formed jointly with P&O Property Holdings, was added in 1990, to which each concern transferred a small number of its premises of equivalent value.

By opening two shops in St. Petersburg’s main shopping street in October 1991, Littlewoods became the first major Western retailer to operate in the Soviet Union. These shops were Anglo-Russian ventures, the first selling (for Russian currency) men’s and women’s clothing, and the second a hard-currency business dealing in electrical and photographic goods, beauty products, clothing, wines and spirits, and food.

The relative importance of the different parts of Littlewoods’ extensive business—still located in Liverpool and more dominant there not only because of its own development but also because of the disappearance of most of the city’s port activity—could best be seen from a glance at its trading results for 1990. The Home Shopping Division, no longer a club enterprise but a sophisticated and highly automated credit system depending increasingly on telephone orders, produced the largest turnover, £933 million, and profit, £53.5 million. Only GUS, with 40 percent of the U.K. market, was ahead of it. Next came the chain stores, with £623 million turnover and £29.4 million profit. Of the new ventures, Index had the larger turnover, £153 million, but was not yet profitable. CDMS, on an income of £18.6 million, had a profit of £1.8 million. The combined retail sales for all divisions was £1.7 billion, with profits of £83.6 million. Much less financial information was known about Littlewoods Pools, the foundation upon which the whole Littlewoods Organisation had been built. It could still claim 77 percent of the U.K. pools business. The largest prize—or dividend as the company preferred to call it—that had been paid out at the beginning, in 1923, was £2 and 12 shillings. In 1991 Littlewoods paid out over £2 million for a prize, far more than its other U.K. competitors. It distributed £170 million in prize money altogether in the season ended July 1990.

Littlewoods’ football pools operations were threatened at the beginning of the 1990s by a campaign to introduce a national lottery. With over three-quarters of the British pools market, the company responded by proposing an arts and sports foundation to which it would contribute, alongside two other U.K. pools companies, Vernons and Zetters. The foundation was launched at the end of July 1991 for the start of the football season in August. The Chancellor of the Exchequer reduced pools betting duty from 40 percent to 37.5 percent for an initial period of four years with the 2.5 percent difference being made available to the foundation and expected to be worth around £20 million a year. In addition, the pools companies began contributing roughly £40 million annually.

In the recession that marked the beginning of the 1990s, Littlewoods proved the resilience of its retailing methods by producing a 46 percent increase in pretax profits in 1990, in contrast to the downward trend of most of the major U.K. retailers. Profits the following year reached a record level of nearly £100 million. Littlewoods’ emphasis on budget shopping and value for money paid off handsomely during the downturn.

Mid-1990s and Beyond: Family Feuding, Restructuring, Fending off Takeover Bids

In April 1993 Pitcher handed over the reins at Littlewoods to Barry Dale, with Pitcher becoming nonexecutive vice-chairman. In September of that same year, Sir John Moores died, leaving ownership of the firm in the hands of some 32 members of the Moores family. The leadership change and the death of the company founder came at an inopportune time as the mid-1990s saw a dramatic reversal of fortune for Littlewoods. Revenues of the pools operations were significantly affected by the launch in November 1994 of the National Lottery, which proved highly popular. Both the Littlewoods and Index chains were being hurt by increasing competition and poor management. In the wake of the death of the dominant founder, under whose watch the company had limited dividend payouts in order to plow money back into the business, the Moores family owners of Littlewoods began demanding and receiving much higher dividends.

Key Dates:

1923:: John Moores and two partners form Littlewoods Pools as a football (soccer) pool business.
1932:: Company enters home shopping sector with launch of Littlewoods Mail Order Stores.
1937:: Company enters chain-store retailing with the opening of the first Littlewoods store.
1953:: Club method of mail-order operation begins to be replaced with credit-based mail order.
1985:: Index, a catalog shop operation, is launched.
1993:: Company founder dies, leaving some 32 members of the Moores family with full ownership of the firm.
1995:: Family feuding leads to takeover bids, which are rejected.
1997:: Littlewoods sells 19 of its largest high street stores to Marks & Spencer for £193 million; a £370 million takeover of Freemans is blocked by antitrust authorities.
1998:: Company joins with Granada Media Group to launch Shop!, a television home shopping channel.
1999:: Littlewoods Personal Finance is formed through a joint venture with Woolwich plc.
2000:: Company’s pools and betting business, Littlewoods Leisure, is sold for £161 million.

Family feuding and interference in the management of Littlewoods were soon more than evident. Pressure from the family led to the ouster of the deputy chief executive in October 1994 and then the sacking of Dale in March 1995. Two months later, Pitcher departed as well via resignation, leaving the company with a dearth of top managers. It appeared that members of the Moores family were jousting for control, with some members pushing for the selloff or flotation of the company in order to cash in their ownership stakes. The company founder, however, had set up a rule whereby a shareholder could sell her stake to an outsider only with a 75 percent vote in favor of the sale.

Takeover bids were soon launched, including a £1.1 billion proposal from Dale, who had also in the meantime sued Little woods for wrongful termination. The other bid that surfaced in

1995 was another £1.1 billion offer, this one a combined bid from Iceland Group, a food retailer proposing to take over the high street stores, and N Brown, a mail-order company eager to snatch up Little woods’ mail-order operations. In December 1995, however, members of the Moores family voted four to one against opening the company’s books to either of these parties or any other party, thereby rejecting the idea of a company sale.

Initially Bill Huntley was installed as chief executive following the firing of Dale. Huntley had been director of customer and marketing services at Sperry Computer Systems. In January

1996 Littlewoods announced that it planned a partial flotation of the company within three years, but the plan was never implemented. Just a few months later, more management changes occurred, with James Ross taking over as chairman from the departing Leonard van Geest, who had served in that capacity since 1990. Ross had been chief executive of Cable and Wireless until November 1995, when a serious boardroom battle led to his departure. Assurances were given to Ross that he would have greater power than his predecessors to manage Littlewoods as well as a more clearly defined role, and that the members of the Moores family had agreed to “a clear separation between ownership and management issues.” It appeared that the family feuding had come to at least a temporary halt and that Ross could concentrate on turning Littlewoods around.

During an event-filled 1997, the new management team at Littlewoods began the year with a new strategy of shifting the firm’s focus from retail to mail order. One move toward this goal had already occurred in 1996, namely the launch of Index Extra, Littlewoods’ first direct-mail home shopping catalog. After scrapping a planned £135 million store expansion program in January 1997, Littlewoods reached a preliminary agreement to sell all 135 of its high street stores to Kingfisher; the deal fell through mid-year, however, when the two parties were unable to agree on the final terms. Instead, Littlewoods sold just 19 of its largest stores to Marks & Spencer for £200 million. At the same time, Littlewoods was attempting to expand its mailorder operations. It reached an agreement in March to buy Freemans, Sears PLC’s mail-order operation, for £395 million. But this deal was soon trumped by a better offer from N Brown. When that deal fell apart, Littlewoods tried anew with a £370 million bid, only to be rebuffed by the Monopolies and Mergers Commission, which blocked the takeover in November 1997 on antitrust grounds. In the midst of all of this tumult, Barry Gibson was appointed as group chief executive in September 1997. With a strong background in marketing, Gibson had most recently served as group retail director of British Airports Authority (BAA), responsible for developing and implementing the retail strategy at BAA’s seven U.K. airports.

Under Gibson, Littlewoods restructured its operations, including the removal of layers of management. The retail and catalog operations were also integrated into a division called Littlewoods Retail, and the company began to emphasize the Littlewoods name. The Index catalog stores were renamed Littlewoods Index, and the Index Extra catalog was redubbed Littlewoods Extra. To further develop the retail operations, Littlewoods in 1998 entered into a joint venture with Granada Media Group to launch Shop!, a television home shopping channel that by 2001 could be viewed by more than eight million U.K. households. Littlewoods held a 65 percent stake in the venture. In July 1999 the company joined forces with Woolwich plc to form Littlewoods Personal Finance. The new venture aimed to use Littlewoods’ customer base and Woolwich’s telephone-based personal banking system to offer such financial services as personal loans, credit cards, savings accounts, and homeowner’s insurance policies. Littlewoods also began moving into e-commerce around the turn of the millennium.

During 1999 a separate board of directors began running the company’s pools and betting business, Littlewoods Leisure. This move was a prelude to the sale during 2000 of Littlewoods Leisure to Rodime plc, a firm involved in digital technologies, for £161 million. The divestment of the firm’s founding business would enable it to focus exclusively on high street, catalog, and Internet retailing (it also changed its name from Littlewoods Organisation plc to Littlewoods plc in the wake of the divestment). Littlewoods’ retail operations were struggling, however, posting a 23 percent drop in profits for the year ending in April 2000. The high street stores were being hard hit by competition from such upstart discount chains as New Look, Matalan, and Peacocks. Gibson announced later in 2000 that Littlewoods would adopt a “better value retailing” strategy, with the prices of some clothing lines reduced by more than 40 percent, in an attempt to better compete with the upstarts. The catalog operations, with the exception of the Littlewoods Extra direct-mail catalog, were in serious decline. During 2001 talks were initiated with N Brown about a possible sale of the company for £500 million ($713 million) but they soon collapsed. The struggling Littlewoods faced an uncertain future as it posted an operating loss of £8.1 million for the 2001 fiscal year. Company management pointed out, however, that the second half of that year had been much stronger than the first half, a sign of a possible recovery.

Principal Subsidiaries

Business Express Couriers Ltd.; Centreville Estates (Holdings) Ltd.; H Littlewood (Scotland) Ltd.; H Littlewood Ltd.; Harrogate Hotels Ltd.; Inside Story Ltd.; J & C Moores (Direct) Ltd.; Littlewoods Chain Stores Holdings Ltd.; Littlewoods Property Developments Ltd.; Littlewoods Property Ltd.; Littlewoods Hampers Ltd.; Littlewoods International (Far East) Limited (Hong Kong) ; Littlewoods International Ltd.; Littlewoods Mail Order Stores Ltd.; Littlewoods of England Ltd.; Littlewoods Retail Ltd.; Brian Mills Ltd.; Burlington Warehouses Ltd.; C D M S Ltd.; Home Shopping Network (U K) Ltd.; Imagination Homeshop Ltd.; Index Ltd.; Janet Frazer Ltd.; John Moores Home Shopping Service Ltd.; Littlewoods Home Shopping Finance Ltd.; Littlewoods Stores Ltd.; Littlewoods Warehouses Ltd.; M.C. Hitchen & Sons Ltd.; Nationwide Debt Recovery Ltd.; Peter Craig Ltd.; Shopping Mail Ltd.; The Home Shopping Channel Ltd.; Littlewoods Secretarial Services Ltd.; Littlewoods 2000 Ltd.; Liverpool Mail Order Stores Ltd.; Liverpool Stadium Ltd.; Shopping Post Ltd.; The Catalogue Shop Ltd.

Principal Competitors

The Great Universal Stores P.L.C.; ASDA Group Limited; NEXT plc; Otto Versand GmbH & Co.; Matalan plc; New Look Group plc; N Brown Group plc; Marks & Spencer p.l.c; Mothercare plc.