Berghaus explores East while rivals hunt cash

Oct 17 2008 by Karen Dent, The Journal

BERGHAUS has opened its second UK store as it focuses on becoming a leader in the global outdoor clothing market, despite a dramatic drop in profits.

The Sunderland company’s three-storey shop in Covent Garden, London, was inaugurated yesterday when Cumbrian mountaineer and Berghaus non-executive chairman Sir Chris Bonington and climber Leo Houlding scaled the building. The store is modelled on one in Gateshead’s MetroCentre, which opened last year.

Berghaus, owned by private group Pentland, is opening 400 shops in Asia, half in China. Brand president Richard Cotter said the two standalone shops would be showcases for overseas licensees.

“China is opening in March 2009, Korea and Japan opened last year. They are all mono-brand stores. These guys need us to tell them how the brand needs to look and feel,” he said.

“That’s why we opened the MetroCentre store. All our partners across the globe came in to get that look and feel. But a lot will come in and have meetings in London. What the store in Covent Garden allows us to say is, this is what we stand for.” The business refused to let a slump in pre-tax annual profits to £1.5m from £3.2m take the shine off the opening.

“In 2007, at an operating level, we grew our revenue. Our operating profit grew by about 12%,” said Mr Cotter. “Last year, we invested more than £1m in building the business in Asia and we will invest more than £1m again in 2008 as we establish Berghaus Asia based in Hong Kong.”

The 2007 figures showed that despite a retained loss of £981,000, compared with £1m profit in 2006, turnover increased to £45m from £43.9m. He said: “In 2008, we are heading for a year of record sales and we will see a significant improvement in profit. The business is in extremely strong financial health.”

Berghaus uses consolidated wholesale as its headline figure to judge how well it is doing. “I would anticipate we would finish £1m or £2m above £50m consolidated wholesale – that’s our share of the market. Given the turmoil in the financial markets and how that is filtering through, everybody is going to go through a difficult 12 to 18 months, but it’s not something we have seen yet. We are looking at another year of record sales.”

He said: “Businesses with access to cash will take competitive advantage from those that don’t. That’s the benefit of being in a privately owned group. Access to cash isn’t an issue for us. Our parent company is investing for the long term.”