Kilkenny finance director Mark Sexton: 'Any expansion we did over the last five years was out of our own cash flow so in a way we're in a position now to look at some expansion opportunities'

Design retailer Kilkenny's finance director Mark Sexton is forecasting a fall in sales this year but the group is still planning to expand, taking advantage of falling rents and the abolition of upward-only rent reviews.

Turnover for last year will come in at about €16m excluding VAT, and on a like-for-like basis, the company expect "a small decline" in the region of about 5% this year.

"While the recession has hit us, thankfully we're a fairly strong company balance sheet-wise," he said. "We would have little or no borrowings on the balance sheet. Any expansion we did over the last five years was out of our own cash flow so in a way we're in a position now to look at some expansion opportunities, like the one in Shanagarry. We are looking at one or two other opportunities as well, again if the right deals are there."

The deal in Shanagarry in east Cork is for the old Stephen Pearce gallery. "We've bought that building and somebody else has bought the manufacturing operation there," Sexton said.

"It's very much the concept that's there already," he said of the 12,000 square feet gallery. "It was already very successful as it was, under the ownership that was there. Our plan is to put our own store in where the Stephen Pearce store was and underneath to put in design workshops. There are workshops there for painters, a photographer, a jewellery maker. It's the whole design concept, which is going back to our roots. We think it's a very good fit and it's a very exciting project for us which we're hoping to open sometime in March or April this year."

Those roots began in the Kilkenny Design Rooms, set up by the government in 1963, with the Nassau Street shop in Dublin opening in 1976. The Dublin operation was later sold to Blarney Woollen Mills and eventually renamed Kilkenny, and just over a decade ago it demerged out from the Mills group under the ownership of Marian O'Gorman and Bernadette Kelleher Nolan.

They have since expanded the group to seven shops, with Kilkenny outlets in Dublin, Cork, Galway, Cashel and Killarney, and the more tourist-oriented Christy's brand opening in Killarney and Cobh. The Christy's shops – which are "shamrock and shillelagh"-type shops – specifically target tourists and 80%-90% of turnover comes from that market. However, the Kilkenny shops themselves are now dominated by the domestic market, with between 80% and 90% of purchases being made by Irish residents. That has partly come from a move away from the traditional heavy pottery and crystal that dominated the Irish scene for decades.

"Fashion has become more and more important for us and that obviously tends to be customers buying for themselves," Sexton said. "But if you take the crystal, the Newbridge and the pottery, we know a good percentage of that is for other people."

Five years ago the drapery was geared towards the tourist market but a strategic decision was made to change that over time because of difficulties with the American market – everything from the exchange rate to the 2001 terrorist attacks to foot and mouth disease.

"Thankfully, as it turned out – be it by luck or design – that turned out to be a wise decision," Sexton said. "It wasn't an overnight thing when the change was being made to the shop. Every year or six months some suppliers would be edited out and some would be coming in and the new suppliers would be reflecting the newer Kilkenny as others were falling off at the other end."

The change to a more contemporary offer can be seen elsewhere. "Over the last few years the trend is definitely away from the heavier pottery and crystalware to things like products and some lighter pottery and for us, what has become bigger over the last few years is accessories like handbags and scarves," he said.

"Waterford Crystal is still a significant brand but obviously – the facts are out in the market – it's a brand that's not as popular, certainly in the Irish context… Newbridge over the past five to six years has done a fantastic job and become hugely successful and obviously it is a very significant part of our sales now."

Kilkenny is looking for a 15,000 square-foot shop in Dublin 2, 10,000 square feet of which will be on the ground floor. Falling rents are making expansion possible and the company has already held talks with its landlords about rent reductions. Some responded with concessions, temporary or otherwise, but others refused to budge. The firm has also had to negotiate with suppliers because the value of the average sale per customer has been falling. The company has also been pushing into the online sales market, setting up the Kilkenny website ( just over a year ago and turning over €150,000 from it.

"We do see a lot of potential there," said Sexton. Eventually Kilkenny would "consider opening something in the United States but now we have to build the blocks. We have more things to do here first. It's not the immediate priority."

So how did the weather affect Christmas sales? "What we found was that the month pre-Christmas, which would be the most important, our sales held up very well," he said, saying that turnover increased slightly across the seven shops, which "was a pretty good position considering what's been going on".

However, in the two weeks after Christmas, the weather hit sales, which were down 25%-30% on last year.

"I wouldn't worry about it," Sexton said. "For us it's not quite as bad as it seems. The two weeks before Christmas Day are way more important than the two weeks after Christmas Day. Interestingly, two weeks ago, which was the first week after the bad weather, turnover was up 25% again."

Curriculum Vitae

Mark Sexton,

Position: Finance director, Kilkenny.

Age: 42.

Career: The chartered accountant has worked at Kilkenny since 2001 and before that spent eight years with Beamish & Crawford in Cork.

Hobbies: Sports, especially soccer, ("unfortunately a Liverpool supporter"); reading (a fan of most fiction).