Aerosoles is speeding up the development of its European store network, making up in part for a sharp reduction in the private label business that it has been handling for Marks & Spencer. The big German market, where the Portuguese shoe company recently acquired full control of the distribution, is one of the major focuses of its investments.
At the same time, Aerosoles is diversifying its sources of production, while maintaining a strong base in Portugal to ensure quick deliveries for repeat orders and fast response to market changes. It is investing in sophisticated logistics to achieve a 50-50 split between pre-orders and re-orders that will benefit its own retail stores as well as its wholesale clients, which feature Aerosoles shoes in some 7,000 stores.
The idea is to use the same moulds for shoes made in Portugal and in other factories around the world. Last year, 1.8 million out of the 3.2 million pairs delivered by the European licensee of Aerosoles came from Portugal. Some 500,000 pairs came from Vietnam and China, causing extra charges of around €600,000 that weighed heavily on the company’s financial results. because of the new European anti-dumping duties Partly also because of various investments, Aerosoles recorded a small loss last year on rather stable revenues of €80 million.
These results refer to the Investvar Group, the Portuguese company that has the Aerosoles license for Europe, Middle East and Africa (EMEA) led by Artur Duarte, who is also chairman of the Portuguese shoe industry association (APICCAPS). The operations of Investvar Group still include a large private label business. A separate company in the USA has the license for the Americas. The two companies have some common suppliers such as the large Paqueta group in Brazil.
Investvar Group began to source shoes from Paqueta for the European market three years ago, building up to a volume of about 400,000 pairs last year. Another 400,000 came from its factory in Romania, including some 250,000 pairs made under the Aerosoles brand. The newest source is Aerosoles’ new factory in India, which started up last October to manufacture solely Aerosoles’ typical «stitch and turned» shoes and some of its sandals. The goal is to gradually reach an annual output of about 700,000 pairs in India.
Meanwhile Duarte is aiming to raise to 140-150 by the end of this year the number of single-brand Aerosoles stores in Europe, most of them fully owned, now that they have proven a certain level of profitability. The store count rose by 21 units in 2006 to reach a total of 106 stores at the end of last year, and those owned by the company have started to break even after amortization.
New stores will be opened in few weeks in various German cities such as Krefeld, Essen, Mönchengladbach, Wiesbaden, Bochum, Frankfurt and Wuppertal, after Aerosoles acquired control of a German joint venture previously shared with a local partner and with another Portuguese company that owns the Fly London brand. Other stores are in the pipeline in such important cities as Düsseldorf and Cologne or the surrounding regions, doubling the store count in the country to about 15 by the end of 2007.
The new German sales subsidiary has lined up a major advertising program to support the new stores and development of the market. It has been placed under the management of Erik Illig, a former executive of Servas, Dorndorf and Remonte that ran most recently the Portuguese production factory of Sioux. He believes in a potential for about 50 Aerosoles stores in Germany in five years’ time, including some franchises, plus many shop-in-shops all over the country.
France, which continues to be a strong market for Aerosoles, should see a total of 37 stores by the end of this year, compared with 29 at the end of 2006. The number of Italian stores is projected to grow to 8. Other openings have taken place in the last few months or are about to occur in such cities as Madrid, Zaragoza, Barcelona, San Sebastien, Valencia, Toulouse, Verona, Lausanne, Brussels, Amsterdam, Belgrade, Zagreb and Prague.
Investvar Group continues to do business with M&S, supplying shoes that the British retailer sells under the exclusive Footglove label. In fact it could well stabilize or even expand this year by about 10 percent if the sell-through is satisfactory, after plunging down from an annual level of 3.2 million pairs in former years to only 1.1 million pairs in 2006. Investvar Group is negotiating an expansion of the range supplied to M&S and it has secured another contract with the Woolworths chain in South Africa, starting with annual deliveries of more than 500,000 pairs.