Rent-to-buy boss tells Kasmira Jefford why it has a valid place on the high street
THE OWNERS of Brighthouse couldn’t have picked a better name to sum up the UK’s biggest rent-to-own retail chain.
Its bold red and yellow fascia above window displays that promise “low weekly payments” and “no deposit” unashamedly seek to grab the attention of passers-by.
Inside, rows of washing machines are crammed in next to laptops, televisions and other aspirational products that customers can get their hands on for weekly payments of as little as £10.
One of its bestsellers this year was “The Sabrina” a black and silver corner sofa snapped up by 1,300 customers in the last five months. At face value, the sofa costs £1,387 but for Brighthouse customers, paying £17.67 over 156 weekly instalments at 69.9 per cent interest, that rockets to £2,756.52 – more than twice the price.
Brighthouse, previously known as Crazy George’s until it was rebranded in 2002, has thrived in the post-recession world, catering to cash-strapped householders who are unable to stump up the cash for big ticket items but are happy to pay more overall if it means lower weekly payments.
Results released this morning show pre-tax profits soared by 16 per cent to £19.6m in the year to the end of March, on revenue up 5.5 per cent to £351.7m.
Even with the recent improvements in the economy, including rising wages and higher disposable incomes, chief executive Leo McKee believes there is still a huge untapped market for so-called rent-to-own retailers.
“The business has grown consistently over the nine years. We serve a group of 7m low-income households who have limited or no access to mainstream lenders. The products that we sell are essential. People need a sofa. They need a bed. There is huge demand for our services,” he told City A.M.
McKee believes there is scope to double Brighthouse’s presence from 300 to 600 stores across the UK. This includes another 56 stores in London on top of the 26 it already owns.
“If you look at the US, where it has been established much longer, there are 9,500 rent-to-own stores. On a like-for-like basis that means there could be 2,000 in the UK.”
Rent-to-own retailers such as Brighthouse have courted controversy from campaigners who claim they are no better than loan sharks, charging inflated prices for goods and exploiting people on low incomes.
In February, a report by an all-party parliamentary group on debt and personal finance called on the Financial Conduct Authority to take action against rent-to-own firms, claiming the transparency of the offers was poor.
However, this is an image McKee is working hard to erase. The affable 68-year-old Glaswegian, who previously worked for Woolworths when its was owned by Kingfisher, is keen to prove the Brighthouse is a responsible retailers that puts customers first.
“Our two mantras are to look after the customers and look after the colleagues,” McKee says, adding that it looked to companies with “sustained excellence” such as John Lewis as a model for good customer service.
He says the company has made efforts to make its prices more transparent by separating the cash price of the product from other costs such as delivery and “unbundled” product insurance, so that it is no longer a compulsory part of the purchase.
McKee said he also welcomed the recent scrutiny on the sector by the City watchdog, saying the company has “invested heavily” in corporate governance, with the appointment of a chief risk officer in 2012. It bolstered its board with three new non-executives last year, all with an accountancy background, including WH Smith chairman Henry Staunton.
Brighthouse’s rapid growth prompted its private equity owners Vision Capital to hire bankers at Rothschild last year to explore options for the business. These included a stock market float that reportedly would have valued it at up to £750m.
McKee said those talks have “died down” and are unlikely to resurface just yet: “Of course they will continue to talk to people – that is what [private equity companies] do. But as far as the board of Brighthouse is concerned we are cracking on. The little flurry from 2014 seems to have died down and it is definitely not at the front of our minds.”