Waterstones has unveiled a new structure as m.d. James Daunt told staff the chain must “fundamentally transform the way it operates” after posting a £37.3m loss in its latest financial results.
The new structure will be “leaner” and reduce the distance between shop floor and head office, to reinforce the “paramount importance of bookselling excellence”, Daunt told staff in an email seen today (8th February) by The Bookseller.
The announcement comes in a week the company’s results spanning the year to April 2012 were released, showing Waterstones’ total sales were down by 14% to £410.4m during a “transformational” year in which HMV sold it to Alexander Mamut. The results showed Waterstones recorded a £25.4m loss—rising to £37.3m after tax, from a profit of £10.4m a year earlier. However, Daunt blamed the results on the business he “inherited” from HMV and said at the time Waterstones was in a “truly shocking state”. Over Christmas, sales at the store increased by 5% like-for-like, he said.
The new structure and reorganisation has split the Waterstones estate into 11 different areas each run by a different retail manager, with each area divided into five or six clusters. There are 58 clusters altogether and each cluster comprises of five or six shops, each led by a cluster leader.
The retail managers are: Duncan Furness, Wendy Kneale, Mark Addison, Chris Laister-Smith, Tim Donne, Erika Ling, Ian Cawley, Matt Gretton, Luke Taylor (current Piccadilly manager), Keith Lloyd and Sinead McCorry who will direct the retail strategy of their shops through their cluster leaders.
Daunt said: “They will liaise much more closely than hitherto possible with the central commercial and operational direction of the company, both to shape and to communicate initiatives and standards.”
Cluster leaders will work with shops' managers to promote “bookselling best practice” and will “draw upon the individual expertise of booksellers to the greatest collective benefit".
Daunt added: “The notion of the cluster expert is particularly important, recognising that we have very considerable bookselling talent in our shops but also that this expertise must be applied more widely and more consistently. The dreadful results of 2011/12 are of the past, and our subsequent performance as you are all aware has since improved markedly. We will continue to build upon this progress, as indeed for our survival we must.” He added that a new staff bonus policy would take effect in April, designed to “share the success we achieve with those who drive it". No staff would receive a bonus this year, he said, “for reasons I hope are evident".
Last week, seven redundancies of regional and divisional managers were made at the start of the reorganisation, and former head of books Rik McShane was promoted to the newly created role of retail director, taking responsibility for field operations, central operations and the commercial department. In addition, Kate Skipper has taken on the position of head of buying, assuming responsibility for publisher liaison and events and the regional management teams, as well as the new titles and children’s departments. Steve Callaghan has been appointed as the head of shop operations and will be responsible for assessing centrally and locally driven tasks and improving shop efficiency. He will work alongside head of stock operations Erwyn Rentzenbrink who will focus on driving efficiencies in stock and at the hub.
Daunt said: “I believe (the new structure) has enormous potential to harness the passion so many of us have for our profession, and if we achieve this Waterstones is sure to prosper.”
Earlier in the week, Daunt told The Bookseller: “We need to run our business much more efficiently and certainly with less regional managers. We have to tackle our costs from the bottom up. We will make some tough decisions in doing that . . . but we need to cut central costs.” Waterstones had 400 fewer staff than usual working over the Christmas period last year, but Daunt said he was confident the emphasis on localised buying would help to turn the business around in two years. “I think the booksellers are genuinely beginning to feel that they are shops instead of just another one from the factory. What we cannot do is have the same offer in every shop. I am not going back to that, it is dismal retailing and I am not doing it anymore,” he said.
The chain has seen 40 shops refurbished so far with another 60 to come this year, although the company expected its 2013 results would still be in the red.
Waterstones was bought by Mamut two months into the last financial period (June 2011), and the historical financial figures released at the beginning of this week reveal the parlous state of the business before it was sold by HMV. Daunt said: “Certainly internally, and to a great degree externally, Alexander Mamut rescued the business. It wasn’t a question of it teetering on the brink, it had gone well and truly over. A lot of things that were taking place were bad. There was a lack of attention, too much focus on market share and not enough on margin. We were a business that was in freefall.”
The accounts stated that the sales performance reflected a “difficult high street book market, with strong competition from online retailers”. They also pointed to non-book products, with sales of related products growing by 1.7% year on year to 8.2% of the overall business. Daunt said he expected sales of digital content to slow, and drew a distinction between his strategy at Waterstones and that of US bookseller Barnes & Noble, which is re-orientating its business towards e-reading.
He said: “That is a bet that I am very happy to take, obviously Alexander Mamut is too. That is one where you have to look into the mirror, get the bottle of whiskey out and decide what you well and truly believe. The e-reading experience will always be something different.”