CCC, Poland’s largest shoe retailer, with an estimated market share of 5 percent in volume, went public on the Warsaw Stock Exchange last Dec. 2. The flotation raised 61 million Polish zlotys (e14.7m-$19.5m) for 21 percent of the company's shares, including a greenshoe allotment for of 6,4 million shares.
The group has declared its intention to invest the major portion of this amount in the expansion of its retail network. It plans to add another 95 stores in Poland over the next few years, in effect doubling in size. CCC, which is a small footwear producer in Poland as well, is also looking closely at the Czech footwear market for a possible move outside the national borders. The group has sufficient production capacities to manage this expansion without further investments in its manufacturing facilities.
The initial offering went relatively well. The start-up price was set at 9.5 PNL (Polish zlotys), higher than the price of 8.6 PNL that had been projected by a stock brokerage firm. The share price rose by 4.7 percent at CCC’s first session on the WSE. It then declined but was back up to 9.50 PLN at the start of trading yesterday. CCC hopes that the share price will double in two years’ time.
According to its own projections, CCC should reach revenues of 270 million PLN million (e65m-$86m) this year, generating operating profit of 35 million PLN (e8.4m-$11.2m) and net earnings of 24 million PLN (e5.8m-$7.7m). Last year, the company had sales of 246 million PLN, operating profit of 18 million PLN and net profits of 11 million PLN.
CCC – a name which stands for Price Does Wonders (Cena Czyni Cuda) - is a success story that started at the beginning of the 'nineties when Dariusz Milek, who still owned 100 percent of the group's equity prior to the flotation, started importing shoes into Poland. In 1996 he started up a franchise-based retail operation, called The Yellow Foot. In 1999 Milek registered the CCC banner, inaugurating a new retail concept. In a few months he had over 100 franchisees whose stores bore the simple CCC logo.
Everything went so well that in 2001 the company was divided into two entities. While CCC continued to operate as a retailer, a new company, CCC Factory, started producing footwear and accessories. The two companies were housed in a modern new office of 3,000 square meters, with a large warehouse of 17,000 sqm.. Located in a special tax-free economic zone in the region of Silesia (Legnicka Specjalna Strefa Ekonomiczna), the new factory complex allowed CCC to cut down on costs sharply, while ensuring a certain flexibility in the supply.
The CCC network of stores sold 5,778,000 pairs of shoes in 2003, and in the first half of this year the volume was up to 3,670,000 pairs. The group has now a total of 71 company-owned stores, including 10 factory outlets, while 192 others are franchised. Most of the retail outlets are located in big and medium-sized cities of at least 50,000 inhabitants. They all feature a uniform and distinctive, almost ascetic décor inside and outside, using combinations of yellow and orange. The average store size is 230 sqm.. The entire retail network occupies a net retail space of 52,650 sqm.. The recommended retail price is the same everywhere, but each store owner can apply his own discount and sales policy.
Recently the company has been essentially targeting the shopping malls, which have been mushrooming for the last few years throughout the country, to secure new store locations. This strategy should lead to a certain elevation in the banner’s image as shopping malls in Poland have annexed the chic and glamour once characteristic of the high street.
Nevertheless, CCC’s core audience is still predominantly middle-tier. CCC’s idea, mission, slogan and name simply amounts to catering for clients who value quality goods at reasonable prices – not an unusual proposition in a country like Poland, but the execution is good. CCC’s leather footwear is priced between 70 and 250 Polish zlotys (15-60 euros).
The typical CCC store operates as a “house of brands,” carrying its own brands and those of other companies. CCC produces 40 different lines at its own factory, all for its own and franchised stores, representing about 19 percent of the group’s revenues this year, up from 10 percent in 2003. The group also imports Chinese and Italian footwear for its own requirements, putting its own brands on some of them. This allows the company to offer over 2,500 models in its stores every year, divided into in three collections one for the summer season, one for the winter season and another one that can be sold in the Spring or in the Fall. Of all these models, about 140 summer models, 70 winter models and 50 mid-season models are designed in-house. Women’s shoes represent 53 percent of revenues, men’s 25 percent and children’s 17 percent.
The CCC brand has become very popular in Poland. According to recent market studies commissioned by CCC, the level of spontaneous recognition is 26 percent, while assisted brand recognition reaches a very high level of 72 percent, thanks largely to various sponsorship deals. CCC funds Poland’s only professional cycling group, Hoop-CCC-Polsat, and the leading women's basketball team, CCC Pabianice. As a matter of interest, one of CCC's main competitors in Poland, the German-owned Deichmann chain, signed a sponsorship deal this September with Slask Wroclaw, Poland’s best known and most successful men’s basketball team.