EXCLUSIVE: Hairhouse Warehouse plots rapid expansion

Hairhouse WarehouseHairhouse Warehouse acquires complementary retail chains as it looks to fast-track its five-year expansion plan.

Access exclusive news, features, interviews and reports.

Subscribe now or login to access premium content.

Subscribe Log in

Access exclusive news, features, interviews and reports.

Subscribe now or login to access premium content.

Subscribe Log in

Hairhouse Warehouse has acquired two complementary retail chains as it broadens its offering with a view to a trade sale or a listing on the ASX in three to five years’ time.

Hairhouse Warehouse (HHWH), founded by Melbourne brothers Joseph and Tony Lattouf in 1992, currently boasts a network of around 140 hair and beauty salons, which double as retail stores for hair and beauty products, in every state and territory except Tasmania.

After quietly acquiring Ella Rouge, a beauty salon chain with 24 stores specialising in skin and laser treatments, all in NSW and predominantly in Sydney, in February, HHWH has just finalised the acquisition of Australian Skin Clinics, giving it another 25 locations, mostly in Queensland. These two acquisitions fast track the Victorian-based HHWH’s presence in NSW and Queensland, respectively, and push the group’s total store count to almost 200.

HHWH is merging Ella Rouge and Australian Skin Clinics rebrand, and over the next 12 to 18 months will rebrand Ella Rouge stores as Australian Skin Clinics stores.

While the HHWH brand has enjoyed rapid growth in recent years, it was the appointment of long-serving Retail Food Group executive, Gavin Nixon, to the HHWH board in 2014 that compelled the Lattouf brothers to consider expanding to a multi-brand retail group. Nixon had spent the previous decade with Retail Food Group, helping develop that Gold Coast-based business into the successful multi-brand franchise group it is today.

“I told them the history of Retail Food Group and how we used the infrastructure at head office to accommodate a number of brands under the same roof in the same industry,” Nixon told Inside Retail Weekly. “That led them to go out there and acquire complementary businesses in the health and beauty space, which is one of the fastest growing industries in the shopping centre arena at the moment.”

The key selling point Nixon put to the Lattouf brothers in terms of acquiring complementary brands, both retailers and suppliers, to sit alongside HHWH was around the synergies and efficiencies that can be leveraged by acquiring complementary, but not competing, brands.

“It’s a big, big upside – you can run under the same roof, virtually all the inter-departments, and have shared services,” he explained. “The big drivers for me saying to the partners, ‘this is something that we need to do. We don’t want to go into food, we don’t want to go into other streams of businesses, we should set our course to get similar businesses’.

“The other big thing that we wanted is obviously the same target market, so we deal predominantly with females between 18 and 50. That was the other thing – we could actually utilise both databases with two businesses. It all just fed in together.”

Compatible synergies
Deb Fairnworth, managing director of Australian Skin Clinics, bought the business in 2007 and franchised it in 2011. Fairnworth said early discussions with HHWH dated back to early 2015, and the success of the brand and its experience in franchising were key drawcards for the business partnership.

“They had a vision of a bigger picture being the largest hair and beauty business in Australia,” Fairnworth told Inside Retail Weekly. “We have a lot of synergy in the way we talk about business, they way we look at our business. I like the way they think – they’re very creative, very out of the box type of people and I bought into that vision. It very succinctly fit with my vision too.”

A key part of the discussion for the Fairnworth was also the prospect of rebranding the Ella Rouge network as Australian Skin Clinics.

“Ella Rouge is a little jaded, it’s been around quite a while and one of the benefits the merger brought to is that we then got 24 leases in Sydney, which is no mean feat.

“The big appeal was to double the size of our network overnight, which is essentially what we are doing. We already spoke to the [Ella Rouge] franchisees and they were all really excited to come on board.”

The acquisition and merger will see Fairnworth stay on as managing director of Australian Skin Clinics. Fairnworth and HHWH will each own around 50 per cent share of Australian Skin Clinics, although the exact figures weren’t disclosed to Inside Retail Weekly.

As it gradually rebrands its Ella Rouge location as Australian Skin Clinics (ASC), HHWH will look to fast track growth in the ASC store network. Nixon revealed that budget has already been approved for at least 15 new ASC stores in FY17. Part of the appeal of both Ella Rouge and ASC as acquisition targets was the real estate assets they held. While they very much compete for the same customer and there is a common ground between the territories that both brands current cover, the real estate assets complement each other – and the existing HHWH network.

“The fit was so good because you had Ella Rouge all in Sydney in the shopping centres,” Nixon explained. You had Australian Skin Clinics in Queensland and Melbourne, so hence, we had that eastern seaboard distribution. The next port of call will be West Australia and Adelaide – that will open into later this year. I might add too that two Australian Skin Clinics stores are opening in New Zealand by the end of the year, in Auckland and Christchurch.”

As suggested by Inside Retail Weekly in late 2015, Hairhouse Warehouse would be likely candidate to successfully launch its homegrown retail brand into international markets. As well as rolling out the ASC brand across the Tasman later this year, HHWH has been courting interest from parties in the UK and the Middle East about expanding into those markets. While these discussions are still in the early phases, Nixon is adamant the HHWH brand has a future beyond the ANZ region.

The long-term play
Once the ASC deal has been finalised, HHWH, between its own brand, ASC and Ella Rouge, will have a business group with a total turnover of around $260 million. Nixon said that the end goal for HHWH is to either list the business on the ASX or secure a trade sale in three to five years’ time. And these plans were what actually provided the impetus for the Lattouf brothers and Nixon to build a multi-brand retail business.

“For us, that was part of the reason for that strategy of moving into associated brands in the same industry,” he said. “We’re growing our database, we’re servicing the same database, so it just all stood to reason.

“There’s no listed entity in our health and beauty space,” he explained. “We’ve got fashion, we’ve got white goods, we’ve got food, nothing in health and beauty in Australia on the ASX. [Health and beauty] is a $5 billion industry we’re chasing, fuelled by the rise in discretionary income and fashion. The other thing is, people want to feel younger, they want look younger, their desire to look younger and feel younger is what drove us into the industry.”

Access exclusive analysis, locked news and reports with Inside Retail Weekly. Subscribe today and get our premium print publication delivered to your door every week. 

Comments

Comment Manually

Twitter

Last October, T2 moved into a stylish new HQ designed to boost teamwork and reflect its sustainability ethos. Then… https://t.co/dNout4TzDh

11 hours ago

Sportswear brand Lululemon has bought the in-home fitness company Mirror for US$500 million. Here's why. https://t.co/ClUk53W7KY #retail

1 day ago

Bardot has announced a new line of Australian-made denim. It's part of the fashion brand's aim to become more envir… https://t.co/g0v6sHCc4T

1 day ago