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Mamut and Daunt outline retail vision
27.05.11 | Lisa Campbell
Managing Waterstone's will be a challenge in the current market and its new Russian oligarch owner is not going to support the chain with a large chequebook, the chain's new m.d., James Daunt, has said.
If the HMV Group's shareholders approve Alexander Mamut's £53m offer made in the early hours of last Friday, then James Daunt, founder of six London-based shops under the Daunt Books umbrella, will soon become managing director of the book chain he acknowledged had "not been performing very well recently". Like-for-like sales dived by 8.4% in the 17 weeks to 30th April at Waterstone's; over the year like-for-like sales dropped by 3.8%.
While Waterstone's year-end profits are expected to be between £9m and £12m, Daunt was adamant the chain would not be a hobby interest for billionaire Mamut but a passion in which they both held "a firm view of what it is we are trying to achieve".
Mamut said the pair wanted to reposition Waterstone's as a regional and local community-orientated bookseller. Daunt added that the Russian was drawn to it "because he is a book person who shares my belief that if you create really good bookshops, they will be commercially successful".
"This is not Chelsea Football Club, that isn't the idea here. He is doing it because he understands it as I believe I understand it. He will not be keeping it up by writing large cheques each year," he said.
Mamut said: "I am firmly of the view that there will be an enduring demand for physical bookshops, which are cultural centres within local communities, and that there is now an opportunity to renew Waterstone's focus on providing a distinctive, high-quality bookselling service which will underpin that."
Daunt, who is expected to take up his post on 2nd July, said he believes value matters to customers, but added his previous admission of a dislike for three-for-two book offers was a personal preference. He said: "I do not like them. I like cheap books—if it is £9 instead of £10 I will buy it for £9. Quite clearly, value really matters."
The former banker intends to better understand how Waterstone's operates before deciding on a business strategy but underlined that digital was clearly important, along with tailoring Waterstone's stores to match local customers' needs.
He hoped that none of the chain's 296 shops would have to close but said he had yet to assess the profitability of each. "I don't know which shops are the most profitable and which are the least. I need to know about the general strategy, the commercial strategy, how they are trying to sell more books to more people, how are they getting people into their shops."
Daunt said that Waterstone's distribution hub, which had experienced problems when it first opened, "needed to work". He is also planning to scrutinise Waterstone's systems, claiming it has 11 IT systems within the business.
It is understood that the future of current Waterstone's m.d Dominic Myers is yet to be determined at the HMV Group, which he had been mooted to join once the sale completes. Former Ottakar's owner James Heneage, some of whose former employees still work for Waterstone's, said it was important that staff were reassured of Daunt and Mamut's vision for the chain in the long term before Myers leaves.
The deal is expected to go through by the end of June; on completion of the deal, £40m will be paid with another £13m paid on 31st October. The HMV Group said banks were supportive of the disposal but warned that if it could not renegotiate its debt, the sale would not go ahead.
The four to five HMV stores that contain Waterstone's departments will continue to exist under a concession arrangement, a HMV spokesman said. However, there is no role for Tim Waterstone, the chain's founder who was widely reported to be in alliance with Mamut to buy the chain he founded.
James Daunt: the new man running Waterstone's
James Daunt is a 48-year-old father of two and, as of last Friday should the sale of Waterstone's to Alexander Mamut be completed, the new m.d. of Waterstone's. He founded Daunt Books in Marylebone, London, in 1990, and has since opened five more under the same name, mainly in family-orientated areas of the capital.
He went into bookselling after moving from New York where he worked for the bank J P Morgan, following a history degree at Cambridge University. He is married to Katy and has two daughters, Molly and Eliza. His interests are reading and travel and at the time he opened his first shop, he saw "a clear opportunity in bookselling". His stores are expected to hit a turnover of £10m this year.
He does not discount books in his shops and pays his employees nearly double the average wage for a bookseller. Daunt believes that the key to running a successful bookshop is to stock good books, along with good systems, a nice environment and excellent staff. He said: "As a bookseller you have a number of stakeholders to satisfy, and a very important one is your employees. That is one of my principles at Daunts. Having the right system liberates you. One of the curiosities of our industry is how inefficient it is, particularly on the retailing side."
The six Daunt Bookshops in London will remain independently run, as is the case now, by their existing shop management.
Alexander Mamut: the man behind the deal
Alexander Mamut is a 51-year-old Russian businessman from Moscow, who the Telegraph named as "probably the most powerful oligarch you have never heard of". Thought to be worth around £1bn, he counts Russian prime minister Vladimir Putin and Chelsea Football Club owner Roman Abramovich among his friends and had close ties to former Russian president Boris Yeltsin.
Mamut trained as a lawyer but practised as a businessman and banker and has a diverse portfolio of interests managed by his A&NN group, including San Francisco-based social networking site LiveJournal and Russian publisher Azbooka-Atticus, in which Hachette Livre owns a 25% stake. His other business interests include Euroset, Polymetal, SPAR and Russian printer Pareto Print.
Mamut is said to prefer businesses with an element of creativity and likes reading "high-quality literature" in English and Russian. Rather than bankrolling his companies, Atticus c.e.o. Arkady Vitrouk, said: "He will invest money if he thinks there is an opportunity to get a return on his investment."
He added that Mamut had a good team behind him but generally had input into Atticus at a strategic rather than a grassroots level. "He encourages us to take a more active role in how we should approach issues, for example, he suggested we look at how many e-reading devices are sold in Russia. He is visionary."
Vitrouk said each of Mamut's businesses operate in pure market conditions. He said: "There is no favouritism for one business over another."