Geoff Quinn, CEO of TM Lewin

Geoff Quinn, CEO of TM Lewin

Shirt maker TM Lewin has had its eye on becoming a globally recognised brand for a number of years now. With this in mind, the company last month revealed international expansion plans that will see it open one store per week for the next three years. CEO Geoff Quinn talks to just-style about those plans, the decision to move manufacturing abroad, the challenge of cotton prices, and the firm's long-term outlook.

Men's and women's businesswear retailer TM Lewin recently announced plans to embark on an international expansion drive. The push will see the group open stores in countries such as South Africa, the Middle East, India and the Far East, amongst others.

TM Lewin first revealed its overseas growth ambitions in 2007. Since then, its international presence has risen steadily and the company now operates around 100 stores in the UK, in addition to an online business, and around 58 stores in markets including Singapore, Malaysia and Australia.

New markets
The shirt maker's success to date, however, appears only to have fuelled its appetite for a larger geographic footprint. 

"The [TM Lewin] brand has travelled quite far and wide already and it's very interesting when we open in a new market to see the recognition we've already got. That is really helping us and giving us the confidence in terms of expanding further," Quinn explains.

Of the new openings, just over half will be in South Africa (46) and India (35), with the balance spread across the Far East, Middle East, Africa and Eastern Europe.

For TM Lewin, South Africa, India, Indonesia and the Philippines are all relatively new markets where it owns either a cluster of stores or concessions. Nonetheless, Quinn is confident the firm has the right management and partners in place to forge a decent footprint in these growing markets.

TM Lewin also sees the potential for expansion into China, Japan and the US at a later date. The former and latter countries are where the company has had its cotton spun and woven, and where its raw cotton has been sourced, respectively, since 2006.

UK manufacturing challenges
Up to that point, TM Lewin's clothing was manufactured in the UK. Yet, like many firms, cost and skilled labour shortages have forced manufacturing abroad, leaving the UK market "decimated", according to some industry associations.

Indeed, like many others, Quinn says that this lack of domestic skilled labour has forced its preference for manufacturing to Vietnam - a decision he is clear is irreversible.

"We can't bring manufacturing back to the UK. When we closed our manufacturing in 2006 it was making less than 5% of our sales. If you imagine the number of processes there are in making shirts, the biggest problem we had was that we employed older ladies that were retiring. They had the ability to do five different jobs anywhere in that production plant."

Quinn says a recruitment drive to replace retiring workers with equally skilled ones, or workers willing to be trained, was unsuccessful.

"It was really about the quality of labour. The cost was also definitely a factor, I'm not going to hide away from that, but even if we wanted to, we couldn't get the people. Things may have changed and there may now be people prepared to work in factories again in the UK, but the investment in setting it all up again to find out whether there are is quite a big one."

Quinn, however, is keen to point out that the company has TM Lewin accredited staff working on a dedicated production line in each factory it works with.

"We design the construction of the fabric and everything in-house. We are obsessive control freaks - but you're only as good as your last shirt and that's what stands us in good stead. Our product is what saves us and it's what gives us the hope for the growth that we've got in front of us."

And it is those ties with China and the US that will no doubt be of benefit to the company if it does make a success of its ambition to enter these countries.

However, China, Japan and the US are on the backburner for now, due to a lack of capital to make the investment.

"We've not had the finance to be able to go out and look at those [countries]," Quinn says. "In Australia we've opened two stores with our own money and we're trading incredibly successfully out there. We see that as a great opportunity in America, but it is a big country and therefore there is a serious amount of thought that needs to go into that."

He adds: "In everything we do, it's trial and error. We're not saying in any markets that we've got a god-given right to open and that our stores will be successful. We can only work off what we've seen. The evidence of how settled we are in Australia gives me a bit more confidence around America."

In the US, Quinn says the company would use a similar approach to Australia and enter the country through concessions initially and standalone stores later on.

Such a move on the US, he says, would require TM Lewin to bring an investor on board by the end of its second quarter. This would ensure a shot at Japan and China also, he suggested.

"We're talking to strategic investors that can help us enter those bigger markets. Almost certainly we won't enter all three at the same time but I'd hope we'd have a good understanding of how to enter those within a year."

Plenty of time for growth
Quinn, however, is in no rush, despite the company's fierce ambition for global recognition.

"I've been here 33 years, so I've seen the business grow from when there were only six of us and one shop. There is plenty of time to carry on growing. You've just got to ensure what you're doing is solid. But if we can have a financial partner come on board that can help us with even one of those countries, then the underbelly of the plan we've got is a really strong plan."

And it could be the success of that plan that may determine how the company performs over the next few years.

Figures released last month for its full year to 2 March showed sales edged up to GBP106.7m from GBP106.5m the year before. EBITDA dropped to GBP10.1m from GBP12m in 2012 due to investment in infrastructure and the expansion of its women's wear offer.

Long-term outlook
Nonetheless, Quinn is upbeat about the new financial year. The company claims to be performing "much more strongly" and benefiting from lower input costs, a "significantly" enhanced product range and the prior year investment in the business.

Turnover in the first six months is ahead by 4% and EBITDA up by 77% on the comparative period.

"We were hit with huge cotton costs ... the biggest hit was around the first six months of the financial year. But we forward buy and carry six months worth of stock in the business," Quinn says.

"We're having a good year and we're very confident we're going to finish up on a good year. The feeling is that when we've looked at costs, we don't feel, touch wood, that we're going to go into that same spiral again. There is a lot more stability out there now in cotton prices, the crops have not failed. The only other side of the coin is the ever-increasing costs of manufacturing. Labour costs are rising and will continue to keep rising."

TM Lewin's performance, however, isn't the only topic on which the company has found itself answering questions.

In July last year, it reportedly hired restructuring specialist KPMG to oversee a potential sale of the business. This was the second time the firm had reportedly been looking to sell up. In 2006, it was understood to have been in the final stages of talks over a GBP35m possible sale.

Quinn, however, dismisses the reports and says the rumours were related to its search for a financial backer.

"We are not selling the business, we're looking at a new financial investor to join with us. At the moment we have a financial investor that owns 20% and really what we're looking to do is have a minority investor that, rather than just bringing money, will bring strategic help in getting us into one of those bigger markets."

Asked whether the company would consider a buy-out if approached, Quinn suggests this is not an option.

"Were not looking to sell the business, definitely not. You need to be a part owner of your business in order to run with it and really grow, and at the moment I've got a management team that are quite committed to growing. We're not looking to sell, we're only looking for an investor to join us and to come along with the ride, not to come in and spoil it."

As for the future, Quinn has big plans for TM Lewin that he hopes will put the company firmly on the global business wear map.

"In the next five to ten years we should have a global brand that is recognisable. In the 70s and 80s Van Heusen was recognised as 'the' shirt. They're not as huge in the UK anymore but they're huge elsewhere. I believe we can be that huge business that people recognise as the brand for quality. We want to be known as the men's formal wear brand of choice."