By IRENE CHAPPLE
It was in a Palmerston North store that Rod Duke found the best evidence of a failing business and the source of his eventual fortune.
The Australian had been sent to New Zealand by Dutch trader Hagemeyer to fix the blood loss at its unwanted subsidiary, Briscoes New Zealand.
And he found himself gazing upon shelves of dirty glassware, priced at $2.71. Why that price? The woman behind the counter said: "That's simple and you'll learn this, Mr Duke, after you've been here a while. The gross margin requirement for glassware is 42.7 per cent. If you apply a 42.7 gross margin to the [purchase] price, you come up with the selling price of $2.71."
The glassware had been sitting there for two years.
Duke sent the glasses into the kitchen to be cleaned, placed them on a higher shelf and priced them at $2.99. Half the stock was sold in the next two weeks. Because customers like shiny glasses and they like to get a cent change. A price of $2.71 they think should be $2.50.
The little things. "Not clever stuff," says Duke now. These are the types of changes he made when he arrived in 1988.
Hagemeyer were wholesalers trying to turn Briscoes, a former wholesaler, into a retailer. But on a $20 million turnover, it was losing $2 million a year.
Duke, who had never previously been to New Zealand, had a simple plan. He would come on a three-year posting, during which he would stem the losses and find a buyer. Then back to Sydney with a bank balance flushed by a good salary and a fat bonus.
He arrived in September and, by November, he'd made an offer. The deal was this: "You keep my bonus and I'll take the keys." It was settled by the end of the year.
The price for the 13 dreary Briscoes stores was six figures of "petty cash".
But, in just 15 years, he has created an extraordinary retailing empire - the company, now listed, consists of Briscoes Homeware and Rebel Sport - in which his personal holding of 75 per cent is worth more than $220 million in shares.
But Briscoe Group sales have been disappointing of late. Only on Friday, the company disclosed the extent of its previously tipped profit downgrade.
First-half net profit, due on September 6, will be $3 million to $3.5 million less than the $9.8 million recorded for the same period last year.
The company is tightly held - just 23 shareholders have more than 88 per cent - but still the share price was driven down 5c to $1.35.
Even before Friday's revelation, Briscoe shares had been falling. And while Duke collected a modest $240,000 salary this year, he missed out on his bonus after the company failed in its internal targets.
He is bullish about the full year but concedes the company has made serious mistakes in its Briscoes Homeware and Rebel Sport brands.
On paper, Duke has lost more than $100 million since September last year, when shares hit a high of $2.02.
He says sales will recover in the second half and the market is looking to a full-year profit that will nudge last year's. But the weight of investor expectation is heavy and his shopkeeper's intuition is, once again, under pressure.
The problem has been this psychological oddity: there have been too many sales and the brands, particularly Rebel Sport, were tarnished.
Consumers want to feel the brands are valued. They were tired of television advertisements shouting, "50 per cent off. Today only", because they knew there'd be a sale tomorrow too.
New Zealanders love a bargain - but not too many. So Duke switched his strategy and, in June, the Queen's Birthday sales - one of few so far this year - produced Rebel Sport's highest sales figures in its eight-year history.
That, says Duke, is the improved strategy beginning to bite.
Problem fixed, then? The evidence is yet to come.
The market has placed trust in Duke and his nimble reaction to problems. They like the fact that his soul lies with retail.
To see why, let's rewind to the 1960s, Adelaide, on a Sunday morning. A young Duke looks forward to this routine, when his father tips out the betting bag and instructs his sons to count it up.
The bag is fat. In those days, punters dragged thousands around to pay and place their bets. So A$20,000 or A$30,000 in loose change would spill on to the floor and the two boys would gather around.
They rolled up bills into hundreds, pinged on the rubber band. And the coins were gathered into methodical piles.
Duke, the bored teenager, soon quits school to work. He begins his retailing career by selling shoes as a 16-year-old, then moves on to televisions at 19. He was a retailer, never distracted by more glamorous job titles, who wanted to beat his mates to the most sales, get the best jobs, climb the ranks. He was, in his words, "relentlessly competitive".
The work routine was this: 9am to 9pm Wednesday through Monday. Tuesday, his day off, 10am to 6pm. Nothing much else to do in Adelaide. And the work, boy, it was flowing. The masses wanted televisions and Duke knew how to sell.
In 1970, on a A$36-a-week retainer, he earned A$55,000. Product in, product out and he sits, just gone 20, with a heap of cash in the bank and a terrific apartment.
The "Adelaide boys", as Duke refers to them now, worked around the clock. Any wind-down time would be at the pub drinking Cooper's ale and buying the flashest meals on offer. Steak and chips, some veges.
"They were fabulous times." Duke looks up to the ceiling, remembering. His voice is rusted by smoking and a packet of Benson & Hedges, which he dips into at regular intervals, is placed mathematically square in the middle of his scribble pad.
"Some of those years were just the best by a long way. You didn't have the responsibility of a wife and children. We all had apartments so there were no plants to water, no animals to feed."
Then, in his mid-30s, he got his Hagemeyer deal and now Duke, the businessman, keeps a tight grasp on his cash.
Privately, he gives generously to charities but claims immunity to his ability to buy a lifestyle of helicopters, beach-houses and long holi-days.
He'd rather have people over for dinner, where his Taiwanese-born wife will cook up a Chinese meal and some aged reds will be pulled out of his expansive wine cellar.
But as the face of The Briscoe Group, Duke is notoriously tight.
When I suggest this is his business reputation, Duke's face contorts into unconvincing surprise. "You're the first person that has said that to me," he says.
But then he laughs and admits: "Look, commercially we can be difficult to do business with. Okay? Very, very, quite difficult to do business with. Okay."
He does this, slips little expressions into conversation. Like the New Zealanders' "eh", this Australian sprinkles "you know?" or "okay?" through almost every sentence.
Suppliers like the Briscoe Group, says Duke, because it delivers - in volume, into good stores, into a recognised brand.
"We're not tight to the point where we say, 'This is the price and sell it to me at that price or bugger off'. That would be ridiculous. We don't do that, that would be cutting off your nose to spite your face."
Briscoe Group makes "every attempt" to buy at the best possible price, so it can sell at the best possible price. Product in, product out.
And while Duke keeps proclaiming his intention to buy or build up another retail chain, his hand is clutched firmly over the company's cash reserves of about $40 million.
Duke built up Rebel Sport after having difficulty finding his gear for tennis at one place. Now he's ready to add another brand to the stable but, of course, only if it's at a very, very good price.
He has been tipped as a bidder in recent deals including Whitcoulls and Pacific Retail Group's Noel Leeming and Bond & Bond, but he dropped out.
Duke and his people have drawn up lists of target industries which are "ripe for change". Eventually, industries are eliminated as it becomes obvious they don't fit Briscoe Group criteria.
Duke, unlike many rich-listers, doesn't discount luck as a contributor to his wealth and refers to a quote from billionaire Australian Kerry Packer about the less fortunate Alan Bond. Packer sold Bond his media empire for A$1 billion, then bought it back three years later for A$250 million.
Of that deal, Packer is purported to have said, "Everybody in their lifetime deserves an Alan Bond."
Running with the Briscoes purchase took guts, but "every shopkeeper", chuckles Duke, "deserves a Hagemeyer".
Duke is always careful with the Briscoe Group wallet, okay. Okay? But listen to this: "You might only get one Alan Bond but there are dogs of a different breed. Perhaps I will get another, but perhaps not of the same name."
Rod Duke
Born: Adelaide, 1951.
1967-1970: Leaves school at 16 and starts selling shoes for Ezywalkin.
1970-1975: Sells televisions and appliances for Canberra TV.
1975-1980: Merchandise buyer for Adelaide department store John Martins.
1980-1982: Merchandise manager for department store Waltons.
1982-1983: Sales manager at Eric Anderson Stores.
1983 -1986: Merchandise director at Sydney Grace Bros.
1986-1988: Managing director of Norman Ross.
1988: Arrives in New Zealand after being headhunted by Dutch company Hagemeyer to fix the loss-making Briscoes New Zealand.
1989: Buys Briscoes New Zealand for the value of his bonus.
1996: Starts Rebel Sport.
2001: Lists the Briscoe Group on the New Zealand Stock Exchange.
2003: Debuts on National Business Review Rich List at $320 million.
2004: Valued on the Rich List at $220 million.
Rod Duke still a shopkeeper at heart
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