Dunnes Stores Ltd. Business Information, Profile, and History

Company Perspectives:

Dunnes Stores is an Irish, family owned, mass market retailer in food and textiles whose customer offer since the company was founded has been based on the principles of very competitive pricing, good quality products and choice. These principles are encapsulated in the words 'Better Value' for which Dunnes Stores has become famous.

History of Dunnes Stores Ltd.

Family-owned Dunnes Stores Ltd. has been battling for the leadership position in Ireland's retail sector--in 2003, the company's position slipped to the number three spot, behind Musgrave Group, with its expanding SuperValue and Centra chains, and leader Tesco, based in the United Kingdom. Yet Dunnes remains an Irish tradition, with nearly 125 department stores, combining groceries, home furnishings, and clothing, throughout Ireland, Northern Ireland, England and Scotland, and Spain. Ireland is the core of the company's operations, with 89 stores, and the company has expanded strongly into the Northern Ireland market, with 23 stores. The company's 11 stores in England and Scotland are textile-only stores, but its four stores in Spain are modeled after its traditional Irish department stores. In addition, Dunnes has begun a drive into the convenience store market, converting one of its sites to a smaller "American-style" format. The intensely private company, which has long held the slogan of "Better Value" and which has long shunned the media spotlight, has also registered a subsidiary, called Better Value Conveniently Yours Ltd., suggesting its intention to expand further into the convenience store market, under the Conveniently Yours name. Dunnes remains controlled by the founding Dunne family, with the founder's daughter Margaret Heffernan acting as CEO since the early 1990s. Under Heffernan's leadership, the company has shifted away from its deep-discount roots to position itself as a mid-market retailer. The company is purported to be grooming the next generation to take over the company, with Heffernan's daughter Anne tipped as her mother's successor. Dunnes remains committed to its status as a private, independent company.

Changing Irish Retail in the 1940s

Bernard "Ben" Dunne, Sr., began his retail career as an employee at a drapers shop in Cork, Ireland, in the 1940s. In 1943, however, Dunne left that shop to set up his own store just across the street. Dunne quickly set out to revolutionize the Irish retail market, and in 1944 opened a new store, on Cork's Patrick Street, which promised "Better Value"--soon to become the company's popular slogan--by offering goods at prewar prices.

Shoppers flocked to the store, sparking what the company later claimed as a "shopping frenzy" and police were called to help manage the crowd. The success of the first store prompted Dunne to add new stores elsewhere in Cork and then throughout Ireland. Dunne, who personally ran all of his stores, innovated by centralizing distribution on the one hand and the shopping experience on the other. Until Dunne, goods were kept behind retail counters, and shoppers required assistance from sales staff simply to handle an item. Dunne, on the other hand, installed clothing racks on the sales floor, enabling shoppers to browse through items at will.

Initially, Dunne's shops, already called Dunnes Stores, featured only clothing and other textile items. Yet Dunne soon recognized the potential for adding groceries--beginning with apples and oranges--to encourage shoppers to come into the store during the lunch breaks. The addition of food items later led the company to extend its stores with full-scale grocery departments. As part of this effort, the company introduced its own brand, dubbed St. Bernard--in part to appeal to its overwhelmingly Catholic consumer base. The company also added hardware goods, while maintaining its policy of accepting low profit margins in order to offer the lowest prices.

Through the end of the 1950s, Dunne established stores in Wexford, Waterford, Limerick, and Dublin. Then, in 1963, Dunne grouped his growing number of stores under a new corporate structure, Dunnes Holding Company, which took over ownership of the entire operation. Dunne also set up a family trust at the same time, in part to ensure that the company remained family controlled.

Dunnes continued to expand during the 1960s, and in the middle of the decade sparked a new revolution in the Irish retail scene. Until then, the company's stores had operated, like the country's retail sector in general, in Ireland's city centers. In 1966, however, Dunnes opened a store at Cornelscourt in what was then Ireland's first out-of-town shopping center. Although scoffed at by experts, who believed the company would fail at the new location, the Cornelscourt site was not only a success, but also became one of the company's flagship stores.

By the end of the 1960s, Dunnes operated 17 stores across Ireland. The company remained intensely private and, despite an active advertising schedule, wary of publicity. As Ben Dunne explained, in what the Times described as a rare interview in 1971, "If there is one thing I hate it is publicity. No one is allowed to write about Ben Dunne. The people I do not like are the people who talk about what they have done and the people who talk about what they are going to do." In that same interview, Dunne reaffirmed his commitment to maintaining family control of his business, saying: "Public companies are like the government. The government has the privilege of spending money foolishly and public companies are no better."

Dunnes Stores concentrated instead on expanding its growing retail empire. By the end of the 1970s, the company had built up a network of more than 60 stores. It also had moved beyond the Republic of Ireland, adding its first stores in Northern Ireland. By the beginning of the 1980s, the company operated seven Northern Ireland stores. By then, too, Dunnes had made a move onto the European continent, opening a store in Spain, on that country's Costa del Sol, in 1980. The success of that venture led the company to begin construction on its second Spain store the following year, which opened in Marbella.

By 1981, Dunnes Stores represented 66 locations, producing estimated sales revenues of some £200 million. Dunne, by then in his 70s, had succeeded in building his company into one of Ireland's top ten firms. Dunne also had been joined by his five children, Frank, Margaret, Teresa, Elizabeth, and, especially, youngest son Bernard Dunne, Jr. The company became swept up in political events in that year when Ben Dunne, Jr., was kidnapped and held for several days by the IRA.

Ben Dunne, Sr., died of a heart attack in 1983. Although the business was nominally turned over to all five of his children, most of whom played an active role in the company's operations, actual leadership of the company became the responsibility of Ben Dunne Junior.

Mid-Market Drive in the New Century

A more flamboyant figure than his father, Ben Dunne nonetheless continued in his father's so-called "pile-em' high" deep discount formula, and successfully expanded the company, raising its revenues to more than £850 million by the early 1990s. By then, Dunnes Stores had opened its first stores in England, growing to more than 11 stores there by the end of the 1990s. Unlike its larger domestic stores, the new English stores limited their selection to textiles.

Ben Dunne's tenure as leader of the family business came to an end in 1992, when he was arrested for cocaine possession in a Florida hotel. The resulting scandal led the other family members to oust their brother, resulting in a somewhat public battle among the otherwise publicity-shy family. In the end, the company paid some £100 million to buy out Ben Dunne's share of the business. The family faced other tragedies, as sisters Teresa and Elizabeth both died at relatively young ages.

Leadership of the family concern now fell to Ben, Jr.'s sister, Margaret Heffernan, who reportedly had been introduced into the family business at the age of 14 when her father handed her a broom and told her to sweep up the shop. That experience was to serve Heffernan in good stead as she turned to straightening up Dunnes Stores' own house--under Ben Dunne, the company had grown into a tangle of subsidiaries, some of which had been operated outside the structure of the family trust under Ben Dunne's personal control. She brought in a number of executives from outside the family, in part in an effort to simplify the company's operational structure.

In the meantime, the alleged unorthodoxy of Ben Dunne's business practices, which included funneling Dunnes Stores funds into the offshore bank accounts of a number of Ireland's political figures, brought the company once again into the limelight in the late 1990s. The resulting political scandal had an additional consequence for the very private company, when the government announced in 1997 that it would appoint an authorized officer to inquire into the company's business practices under Ben Dunne.

Dunnes faced other difficulties as well during the decade. British retail giant Tesco had entered the Irish market and gained steadily, capturing the number one retail spot away from Dunnes. At the same time, a new breed of deep-discount retailer, led by Germany's Aldi and Lidl chains, had entered Ireland, placing Dunnes' own discount formula under pressure.

In response, Margaret Heffernan took the company into a new direction, adding home furnishings to its product mix and moving it into the mid-market retail category. Heffernan's strategy appeared to pay off, particularly as the country's fast-growing economy created a new level of disposable income during the 1990s. By the end of that decade, Dunnes Stores had advanced strongly, nearly doubling its revenues to top an estimated EUR 2 billion.

By the start of the 2000s, Dunnes' network had grown to more than 120 stores. In 2000, it launched a new store format, adapting the American-style convenience store concept for the Dublin market. By 2001, the company had opened a second store featuring the smaller format and had registered a new subsidiary name, Better Value Conveniently Yours Ltd., in what some observers saw as the company's intent on expanding its convenience store operations. In the meantime, Dunnes continued to open new stores, bringing its total to 125 stores. After entering Scotland for the first time in 2000, the company announced its intention to boost the number of British Dunnes stores by up to 25 by 2005.

The company was said to have held buyout talks in 2000 with U.S. retail giant Wal-Mart, which had expressed an interest in entering Ireland. The Dunne family, however, decided to retain control of their business. At the end of 2002, Margaret Heffernan and Frank Dunne appeared to be grooming the next generation of the Dunne family to take over at the company. Anne Heffernan, who joined the company in 2000, appeared the most likely successor to her mother's leadership role.

In 2003, the Irish government at last appointed an authorized officer to look into Dunnes Stores' records. While the results of that investigation were to remain private, it nonetheless represented a new intrusion for the company's carefully guarded privacy. That same desire for privacy had reportedly led the company to quash a story slated to appear about Dunnes Stores in the Irish Independent, which allegedly chose not to run the story in order to safeguard the yearly EUR 1.6 million in advertising revenues provided by Dunnes.

Mid-2003 held more bad news for the company, when industry reports placed longtime rival Musgrave Group, which operated the SuperValue and Centra store chains, ahead of Dunnes Stores for the first time. Dunnes Stores' share of Ireland's retail market had slipped back to just 22 percent. Yet that figure still represented an estimated EUR 2.5 billion in revenues--a figure that did not include the company's growing operations in Northern Ireland, the United Kingdom, and Spain. To shoppers, at least, Dunnes Stores remained synonymous with Irish retail history.

Principal Subsidiaries: Dunnes Stores (Bangor) Ltd. (U.K.).

Principal Competitors: Tesco Plc; Musgrave Group Plc; Roches Stores Ireland Ltd.; Arnotts Plc; Brown Thomas Group Ltd.

Chronology

• Key Dates:
• 1943: Bernard "Ben" Dunne opens his first store, a drapers shop, in Cork, Ireland.
• 1944: The first store bearing the Dunnes name opens.
• 1956: Dunnes Stores launches its own brand, St. Bernard.
• 1963: Ben Dunne places his stores under a new entity, Dunnes Holding Company, and creates a family trust.
• 1966: Dunnes opens in its first out-of-town shopping center.
• 1980: After expanding into Northern Ireland, Dunnes opens its first store in Spain.
• 1983: Ben Dunne, Sr., dies of a heart attack; Ben Dunne, Jr., takes over as the company's head.
• 1993: Ben Dunne, Jr., is forced out of the company after being arrested for cocaine possession.
• 2000: Dunnes Stores opens its first store in Scotland; the company opens its first convenience store; the company announces plans to open up to 25 new U.K. stores by 2005.
• 2003: Dunnes Stores slips back to third place in the Irish retail market, behind Tesco and Musgrave Group.