Eason on track for second year of profit but warns on Brexit

Eason on track for second year of profit but warns on Brexit

Eason is on track to retain its profitability this year, with single-digit revenue growth, its c.e.o. Conor Whelan has told The Bookseller on the eve of the all-important Christmas bookselling season. However, the chain’s chief also warned of the potential impact Brexit could have on the recovering company’s fortunes.

In an interview with The Bookseller this week, detailing the 65-store bookseller’s turnaround—from a €21m deficit in 2009, when Whelan was appointed c.e.o. and moved from his role at Spar Ireland, to a profit of €1.2m in the year to January 2016—Whelan said that the retailer had achieved single-digit revenue growth in 2016 to date, and expected to maintain its profitability when reporting its annual financial results in January 2017.

Much depends on the “all-important” run up to Christmas, Whelan cautioned, when the retailer makes 20% of its yearly revenue in just eight weeks. But he was confident about the strength of the festive publishing, and forecast that the chain would return another profit. “The profitability is modest in this sector and it is all based on how Christmas goes, but we are aiming to maintain profitability after a positive performance this year [to date] and single-digit growth in revenues, with the key season  yet to come,” he said.

After relaunching its e-commerce website, 10% of the company’s book sales now come  online, with its overall sales up 33% year on year in 2016. Its website sales now accounts for 5% of its total business.

Eason has also invested around €17.5m in refurbishing its stores in the past five years, €4m of which has been pumped into its flagship 61,000 sq ft O’Connell Street branch in Dublin, which has just seen a refurbishment of its 11,500 sq ft ground floor. The “tired” and worn-looking dark carpets and clunky display units have been replaced with wooden floors, slick grey tables and fresh lighting.

The chain has also been working with former Waterstones and HMV commercial director Michael Neil on a fresh books strategy, which sees staff recommendations sit alongside its three-for-two and deeper-discount “Wow” pricing offers. “The book strategy is to be better at selling, better at buying, more efficient with returns and to make sure our shops are easy to shop at,” Whelan said. “We are working on developing passionate and enthusiastic book champions, focused on giving the best customer service, as well as holding the biggest and most exciting book events in Ireland.”

Moving forward, the chain is keen to open more stores, Whelan also revealed. “There are some independent chains we have looked at and that we keep on our radar, and there are some franchise opportunities. But if we opened one new store a year, it would be a good target,” he said. “We would probably have to acquire an independent, but we wouldn’t go in until it was [achieving] €3m turnover, or that kind of figure. We would like to grow our portfolio. We know what the targets would be in terms of which stores to open and which locations to go in.”

Its omnichannel strategy will be the focus going forward, with Eason aiming to maintain its rate of growth (33%) in online revenues. To that end, it will launch a click and collect service in January, along with a refreshed loyalty card offer and a new app.

However, the company will also be keeping a close eye on how the continuing plans for Brexit impacts the value of sterling, which could have a significant effect on Eason’s revenues. “I am confident about the publishing, but Brexit concerns me,” Whelan said. “Our core market is still challenged and it has been a very slow recovery. Post-Brexit [vote], there has been a softening of consumer sentiment. Ten of our stores operate in the UK [in Northern Ireland] and 70% of our books are bought from the UK, so that is a big impact on uncertainty. It is harder to deliver on our cash margins when we are selling books, on average, 10%–15% cheaper. Obviously it means we need to pass on as much of the benefit to our customers as possible, but we have a very fixed cost base. That's a challenge.”

He added: “Irish retailers are reforecasting growth as a result of Brexit. We were the fastest-growing economy in Europe. With slow-moving stock such as books, we are now sitting on old value stock, because we have stock bought at much higher value.”

Whelan said that since Donald Trump’s anointment as US president elect, sterling has quivered again. “From our perspective, we would want to see a pretty strong sterling versus the Euro. We don’t want volatility: we want strong, stable sterling,”  he said.