Designer Footwear Looks Good Fit for Investors as Jimmy Choo Goes Public
We said at the start of this year that the options for luxury shoemaker Jimmy Choo – if the brand is going to speed up expansion into Asia and other new markets – are either an initial public offering (IPO) in London, or the sale of a minority stake (See Private Equity: Saviour or Slayer of Luxury Fashion?). Plans to proceed with a London IPO have now been confirmed. “Jimmy Choo is a clear success story with strong momentum and I am confident that our future as a public company can only extend our reputation and position in this attractive sector,” said Jimmy Choo’s chief executive Pierre Denis in a statement.
The writing might have been on the wall for a while, but this imminent listing is a big deal nonetheless, and could value the brand at more than US$1 billion (£700 million). The company had profits of £21 million on full year revenue of £281.5 million in 2013, and for the first half of this year, revenues were around £150 million – up 2.2% compared with a year ago, on a like-for-like basis. The company currently operates 170 stores in 34 countries, but that store tally could increase by as much as 50% over the next five years – fuelled by cash generated from the sell-off of shares.
The wider significance of Jimmy Choo’s listing is its endorsement of footwear’s burgeoning importance compared with other apparel categories. Indeed, global sales of footwear have grown faster than clothing for more than a decade. And in designer apparel, the growth disparity has been visible over the last four years – with footwear growing at a compound annual rate of over 7% against less than 5% for clothing (at fixed US dollar prices).
Global Growth of Designer Footwear vs Designer Clothing 2008-13
Source: Euromonitor International
Celebs fuel desirability
Jimmy Choo will be the first luxury shoemaker to list on a stock exchange anywhere in the world, but it is unlikely to be the last. Luxury shoes have become big business, and all manner of players in the luxury goods industry – from retailers to investors – are keen to grab a piece of the action. Last year, for example, the world’s biggest luxury goods group LVMH bought a majority stake in UK shoe brand Nicholas Kirkwood (See Luxury Behemoths Eye Long-Term Opportunity in Small Designer Labels).
Pop star Beyoncé is known to be a fan of Kirkwood’s shoes – and that type of unsolicited celebrity backing has been a key factor to the cachet of high-end footwear brands. Michelle Obama wears Jimmy Choo, and so too does the fictional character Carrie Bradshaw in in US-sitcom Sex and the City. The red carpet at Oscars’ night – or any other awards ceremony, for that matter – is getting well worn from the heels of designer footwear. Sergio Rossi (Kering), Manolo Blahnik, Rene Caovilla, Casadei, Christian Louboutin, Tabitha Simmons, Gianvito Rossi, Charlotte Olympia, Giorgia Caovilla and Sophia Webster – all these brands are on the up and up thanks to a new wave of trendsetting visibility.
Out with the handbag, in with the shoe
Five years ago, it was all about the “it” handbag. Now, it is increasingly about the “it” shoe. Consumer demand has been encouraged by hefty investment in footwear floor space by big-name department stores such as Harrod’s and Selfridges in London, Lane Crawford in Hong Kong and Barney’s and Macy’s in New York. Each has unveiled huge new footwear departments in response to a seemingly insatiable appetite for trendy shoes. And it is not all about women’s footwear. Worldwide sales of men’s luxury footwear topped US$9 billion last year, up 6% on the previous year (at fixed US dollar prices).
Wider segmentation is key for Jimmy Choo
Portfolio diversity is going to be key for Jimmy Choo as it moves forward. A bigger footprint in Asia and the emerging markets now seems a given over the next five years, but to strengthen its position in more mature markets the brand is almost certain to focus on segmentation. Men’s shoes and possibly even children’s shoes will become increasingly visible in its stores, for example. Accessible price points will also be important, especially in the US, where affordable luxury is in high demand.
Portfolio diversity does not stop at shoes though. Jimmy Choo is already active in categories such as fragrances, handbags, and small leather goods, which now make up an estimated quarter of the company’s business. Fragrances, in particular, could become higher profile as a way to recruit new – less affluent – consumers to the brand.
Product diversity is also important because luxury fashion is renowned for its fickleness. Now, the new “it” product is the shoe. But, the chances are “it” will be something different in five years time. Nothing is written in stone, and Jimmy Choo needs to cross-fertilise across the luxury landscape. Indeed, if fellow British company Burberry can build a £2 billion luxury lifestyle brand on the back of a trench coat, no one should bet against Jimmy Choo doing the same on the heel of a stiletto.