Gerald Ratner – the rise and fall of a rough diamond

November 1, 2013 7:19 pm

Gerald Ratner – the rise and fall of a rough diamond

By Natalie Graham

Gerald Ratner, 63, created a jewellery empire in the 1980s, with 1,500 stores in the UK and 1,000 in the US. Beside Ratners, The Ratners Group consisted of H Samuel, Ernest Jones, and Watches of Switzerland. The entrepreneur is best known for making aspeech at the Institute of Directors in 1991 in which he described one of his products as “total crap”. The remark cost him his business and his job. Before his exit at 43 the company was making profits of £125m a year. Today, he runs the web-based jewellery retail business geraldonline.com and is an after-dinner speaker.Did you think you would get to where you are?

What I have learnt about business is to always expect the unexpected. I never thought I would be acquiring other companies and become the largest jewellery retailer in the world.

The business only took off when I changed the way we operated, because the family’s six shops were not making any money. Stores like Next and Top Shop were drawing in customers but the jewellers were empty. I had to make our shops appeal to 16-24 year olds, who in the 1980s had the disposable income. I put the earrings and chains in the front of the window and diamond rings at the back, and played pop music.

What was your best preparation for business?

Working in a shop behind the counter from the age of 15 to 25. I believe you have to start at the lowest level so you understand the grass roots of the business. You cannot order people around if you have never done what they have done. The fact that I did errands and cleaning up stood me in good stead and gave me the common touch.

When you had made your first £1m, did you want to slow down?

I would have made £1m profit in the early 1980s when the share price was creeping up. Not long after, it really took off in 1986, going from 20p to £4.50 within a year. My shareholding increased dramatically after I changed the formula of Ratners and began the acquisition of competitors.

You never look at how much you are worth. But I could not slow down. Exactly the opposite. I was too busy trying to build a company and increase our share of the market.

What is the secret of your success?

It is getting the detail right and knowing my subject. I have specialised in jewellery for nearly 40 years, and I have learnt from my mistakes. Many people in this business don’t know the subject in enough depth. When I acquired H Samuel in 1984 they had 450 stores. They had problems because they had brought in designers who knew nothing about jewellery retailing.

Jewellery is a small item and it has to be well lit. We used to display all our diamond rings 42 inches from the ground, because the average woman is 5ft 4 ins and she would see the items most easily at that height. H Samuel brought in designers who displayed watches six feet up in the air, pointing at the ceiling, on the wrong shelves.

Do you want to carry on until you drop?

No. I am not as ambitious as I used to be, but that is probably because I am older. I have eased back to a certain extent, though I do travel around the UK and Europe making speeches as a sideline, which I really enjoy. Running an online business is not as time-consuming as running a chain of shops. It is more like having just one shop. To be honest, I could run my business from a deckchair in Southend!

Gerald Ratner CV

Born: London, 1949

Education: Hendon County Grammar School, from which he was expelled at 13

Career: Joined family business at 15 and gradually transformed it into a public company with over 2,500 shops at its peak. He later founded The Workshop, a gym chain that he sold for £11m in 2001. Set up Geraldonline in 2002 and expanded into India this year.

Lives: Mr Ratner lives with his wife, Moira, in Cookham, Berkshire. Their children are Sarah, 24, and Johnny, 22. From his first marriage he has two daughters, Suzy and Lisa, and two grandchildren.

Other interests: Cycling

What is your money philosophy today?

I have got more fear of losing my business, so I am much more careful than I used to be in the 1980s. In 1991, I lost everything I had because all my money was tied up in shares and they went from £4.50 to tuppence within six months. When I left Ratners, I did not have a bean for seven years. I just got further into debt. I did not earn any money and I was in a state of depression, but I cured that by cycling.

I was not spending any money either, living off very little. I was not going out or on holiday or buying clothes. I had to sell the house, everything. The reason I was left with absolutely nothing is that I also had a massive tax bill for £1m, which I could not pay. I was completely wiped out.

What was your biggest financial risk?

When I already had 500 shops in America, I bought another 500 for £500m in 1990. It was a success, and it still is a success. You felt that you could not fail by then and I enjoyed taking risks. I raised the money on the stock market. I was on a salary of £650,000 a year and if those acquisitions failed I would have lost my job. I was not to know that the next year I would lose my job anyway.

Have your spending habits changed?

Yes, completely and dramatically. I don’t throw my money around. When I fly I go on Ryanair or easyJet. I don’t stay in expensive hotels, or buy luxuries generally. I keep my laptop for five or six years and I don’t buy gadgets as they come out. I don’t go down the route that I did before.

How have you survived the recession?

By trying to focus on the business. I believe that a lot of people blame the recession for their own failings. You can still be a flop in the boom, as I was. If you are getting things right the chances are the recession may not affect you.

What is your commitment to charity?

I don’t like people going public about how much they give to charity. However, I tend to favour anything to do with animals, like the RSPCA and Battersea Dogs Home. We adore our Labrador, Benji, and he adores us.

Do you allow yourself the odd indulgence?

My only indulgence is a carbon fibre £8,000 road bike. It is a wonderful machine, so fast and comfortable, that is a delight to be on. I cycle 22 miles every day. I do buy expensive things that go with it, like the shoes and clothes. Most places I go to either by bike or train. When I do my speeches, I use my wife’s Volvo to get there.

Picasso or Art Deco as an investment?

I have bought art and antiques but not as investments. I don’t think about their value. I get a great deal of pleasure from looking at my oil paintings by Atkinson Grimshaw. He painted night scenes in the 1880s of damp fogs and people walking around with gas lamps.

Do you believe in leaving everything to your children?

I think you have got to be very careful about that, because I have seen children who have been given too much. In fact, it did my children quite a bit of good when I was in my wilderness years. It is better for young people to make their own money. They will enjoy a property more if they buy it themselves. My view is that you help family members when they really need it, or lend them money over difficult patches.

What is the most you have ever paid for a bottle of fine wine or champagne?

In 1990 I bought a bottle of Montrachet white wine for £400 at Mark’s Club, a private members’ dining club. I had never drunk anything so fantastic so I rang the club and they supplied me with a case of it for £1,800. I drank one bottle at home and kept the other 11 bottles in the garage. One day I left the door open and someone nipped in and stole the case. The thief would have drunk it like plonk because they would never have known its real value.