Itsu, the Julian Metcalfe-founded, Asian-inspired brand, has reported that “soaring demand for healthier choices” led to a 32.7% increase in its EBITDA to £6.9m for the year to the 1 January 2015, with turnover up 20.8% to £67.9m.
The group, which opened 10 new locations during the period, said that margins improved significantly during the year with profits after tax increasing year on year to £1.7m. Like-for-like retail store sales also grew by 6.8%.
It said that even more customers “have voted with their feet” for the brand in 2015, with year on year total sales growth up in the late teens.
The group, which will have 63 sites by the end of 2015, has seen its workforce increase by 30% over the last two years and said that plans for the rest of the year included further store launches nationwide and the continued roll-out of breakfast menus across its estate.
Metcalfe said that expansion had been driven by the start of “a low-fat, low-sugar food revolution in Britain, and is backed up with itsu’s sustained focus on innovation across 10 new locations”. This included a flagship store on the Strand in London and a second regional opening in Brighton.
Metcalfe said: “Itsu’s awesome performance is the result of surging consumer demand for healthier meal choices at affordable prices. Our freshly made, Asian-influenced food is inspired by Itsu’s ‘eat beautiful’ brand philosophy, and through quality ingredients and vibrant menus, we are meeting consumer appetite to lead healthier lifestyles. Due to the incredibly positive customer response to new locations outside London, regional expansion plans have also been accelerated and we’re confident the remaining openings in 2015 will be a success.”
In 2015, the business has continued growing by extending beyond the core lunch-time offering into breakfasts, evenings, longer opening hours and new menu launches.
Metcalfe said that further investment into 10 new sites throughout 2015 (including Westfield and Bicester Village shopping destinations and Stansted Airport) will continue to “drive the company’s mission to help people eat more healthily”.
Comment by M&C editor Mark Wingett including interview with Itsu chief executive Cameron Roberts.
For chief executive Cameron Roberts it has been a year of firsts for Itsu, a first train station site (Euston), a first airport location (Stansted), a first suburban site (King’s Road), first shopping centre unit (Westfield London to open next month) and what he describes as a first ‘non-obvious Regional outlet’ in Reading. However, it is not the first time Itsu has delivered a set of results that underlines the potential of a company that is looking at becoming a national and international business.
First the obvious, the above highlight very encouraging top and bottom line results with margins improving in what is becoming an increasingly competitive market space. The performance also highlights the core strengths in the brand and its perceived differentiation. It also show how it is successfully tapping into many of the emerging consumers trends that M&C Allegra has highlighted over the last two years around healthier positive/feel-good eating (less carbs and better ‘after-glow’), taking in growing demand for more adventurous ‘on-trend’ eating and for affordable indulgence.
The key test for the brand was also going to be how it performed outside of the capital. The business has been careful with its locational expansion, recognising that the greatest numbers of its target audience work within London and it has been slow to regionalise. The pace of this is being picked up and with the strengthening consumer economy - this appears nicely timed. After launching in Oxford in 2013, further regional openings in Brighton, Reading and Cambridge have followed. Bicester Village will follow before the end of the year, with Leeds set to follow in 2016.
Roberts says that all the company’s regional sites are performing well above expectations, underlining the group’s confidence that it can become a national brand. He says that the group has a “fantastic pipeline” in place for next year. He says: “There is a great property dash, but the format is innovative and flexible enough for us to be confident that it can work in a lot of places. While regionally the openings are performing well that doesn’t mean we won’t be investing in our London estate. There is also plenty of ‘white space’ to go after in the capital.”
He highlights the success of the group’s King’s Road site, which unlike its others sites in the capital, he describes as having a “residential, suburban feel”, as a perfect example of the kind of locations the brand can now go after. He says: “It is a seven day a week operation, where I would say 50% of our business comes from after 3pm, showing the power of the proposition to appeal to customers across the whole day.”
The key foundation of the group’s success has been its people, Roberts believes it has one of the lowest staff turnover percentages in the industry. It invests a significant amount of time and funds in training and development, which is highlighted by the amount of internal promotions across the business. Roberts says that recruitment in the regions has been consistent with that in London, people want to work for a brand that offers “really fast career progression, high levels of internal promotions and people retention, and great reward.” It has also recently underlined that point with the appointment of Jo Davis, formerly HR director for Netto UK, Sainsbury’s joint venture with Dansk Supermarked, as its group people director, with its first people director Gillian Thompson becoming its first Academy director.
There will be further opportunities in new product development, where for many it is a pioneer. It is late into the breakfast day part, and will need a decent hot beverage offer to support this, but Roberts says that the uniqueness of its offer will be a key strength as it rolls out the menu further. He says: “We have the breakfast menu in eight sites now and on average it accounts for 10-15% of sales. People like the doors being open earlier and being able to get a type of breakfast that you can’t get anywhere else.”
Metcalfe has previously talked about increasing the group’s estate 10 fold to 500 sites, although 200 seems a more realistic goal. Roberts won’t be drawn on the exact number of sites it can potentially grow to only to say the potential is “huge and in five years’ time it will be a lot more than we may think today due to the growth of the healthy eating market, of which itsu is a leader and pioneer”. He added by wat of anecdote, that “from memory when PizzaExpress brought out its original IPO document it was targeting less than 100 sites and now sites at some 400 odd restaurants!”. It will interesting to see what role the group’s grocery business plays in its UK expansion, its growth could well soften up additional new UK geographies. There is also much more to come on the international front, with a launch in the US on the radar.
You get the feeling that the group’s UK expansion will take care of itself, because Itsu has its sights on a larger prize and over the last year to 18 months it has confidently been going about its task of building a business that is globally scaleable. Strong foundations indeed.
