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Schuh's £95m deal with the Americans was a perfect fit

When Colin Temple, managing director of Scotland's branded footwear retailer Schuh, took a phone call at his Livingston office from Tennessee one day in late 2010, he little knew it was to change lives.

SHOE IN: Schuh managing director Colin Temple oversaw a £37m windfall that was shared out amongst the 2300 staff of the Scottish branded footwear retailer. Picture: Gordon Terris

Journeys, part of giant corporation Genesco with 2300 stores across the US, arranged to send a four-man team on a three-day Scottish visit, but Mr Temple and colleague Mark Crutchley who each owned 37% of the business did not suspect an approach. "Mark and I felt they were just on a fishing trip," the MD says. But at dinner on the last night, "they said they were going to invite me to the prom - I thought what does this mean?"

It meant an offer of £95 million for the business, sparking one of the most staff-friendly deals ever struck by Scottish directors - a £37m windfall to be shared among 2300 staff, and a further £7m into a trust for the staff's chosen charitable causes. Mr Temple and his colleague were happy to give away one-third of their instant fortune, settling for £25m each, and enabling the longest-serving Schuh staff to pocket six-figure pay-outs.

"We were able to do something quite nice for them which was a way of saying thank you," Mr Temple says. "The Americans were nervous because they thought it might be giving people life-changing amounts of money and they would run away, but the reality is they didn't - we held onto all our store managers." He adds: "Our percentage shares could have given us more money ... we felt with advice from our advisers that it was a fair amount."

The directors stand to earn another £25m if they meet performance targets next year after a four-year lock-in to the business, and Mr Temple says: "In the first year we opened substantially more stores than planned."

Last June Schuh reported an 18% sales rise and record profits of £25.6m, with the chain reaching 92 stores, and it is poised to create a further 50 jobs in Scotland over the next five years with the opening in June of a new European distribution hub at Bathgate, taking its West Lothian employment to more than 500. So growth is likely to be on track to beat the targets.

But even the first tranche of the pay-out was subject to a two-year warranty period.

Mr Temple, 51, says: "The great thing about a warranty is that Mark and I couldn't spend any of our money ... I bought my wife a washing-machine ... two years gives you a lot of thinking time as to what to do."

He says the wellbeing of his children (23, 19 and 17) is paramount, adding : "I have come from an industrial background in the north-east of England and I know what it is like not to have."

Schuh did not look like a jackpot job when Mr Temple joined as a merchandising buyer in 1988. Founded in 1981 with a store in Edinburgh's North Bridge Arcade, it was snapped up by family retailer Goldbergs which collapsed in 1989 leaving management to pick up the pieces. They salvaged six stores, and refloated the business. "We put some personal money into it - £5000 which was a lot of money at the time and I had to borrow it," Mr Temple says.

Over the next 15 variable years Schuh used brands, the internet, and unusual levels of IT efficiency and customer service to survive the store wars on the high street and continue to grow. "The best time was when we didn't have any money," Mr Temple says. "When you have free cash it probably makes you a little too arrogant, if you are borrowing money with covenants from the bank you have discipline."

Mr Temple became the reluctant pioneer of selling shoes over the internet, which has 10% of UK footwear sales. "To my dying shame I was trying to prove it couldn't happen," he recalls. "But in the early days it was very lucrative because it wasn't as crowded as now."

Schuh built its own IT platform which has enabled it to offer customers the fullest range of shoes both in store and online. "Every business will give you the clichés about trying to keep things as flat as possible but our business is probably built on trust - our stores will trust us to give them the best stock package and we will trust the stores to make sure it goes on display and we give great customer service." Staff benefit from a company-wide, John Lewis-style performance bonus, Mr Temple says. "We have traditionally said if the company does well, everybody does well ... a lot of clothing and footwear retailers use incentives to sell things like shoe polish, we are not as pushy as other people and it also means we can sell equally well online - a lot of retailers struggle with getting staff to send shoes out for internet sale."

In 2004 Mr Temple led a four-man buy-out of the business with backing from Bank of Scotland, then managed to open three or four stores a year whilst paying down the debt. "In about 2006 the market fell away and sales and profitability went down ... every week of sales we held as stock was money we owed the bank, so we got a lot slicker at getting stock in the right place at the right time."

Loan notes were repaid a year early, enabling Schuh to go back to the bank in 2008. "We did our refinancing round with Bank of Scotland a couple of weeks before everything went pear-shaped, and we got a really good deal," Mr Temple says.

In late 2010, just before Genesco's approach, Mr Temple and Mr Crutchley bought out the 25% stake held by two other directors.

He comments: "It would be fair to say we are still friends, we sorted that issue out."

He goes on: "Our business wasn't for sale. When we were approached, the reasons for selling were that the Americans were going to come into the marketplace anyway, and at some point we would have to refinance. It sounds a bit naff but we liked them and they seemed to like us."

Three years in, Schuh has accelerated sharply with 20 stores added last year, and Mr Temple is focused on how to grow overseas. When the four-year tie-in ends next year, he has no plans to quit.

"I would love to be able to work till I'm 60 - unless they don't want me or there is somebody else who could do it better."

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