The Italian company Nice Footwear has limited at around 15 percent the decline in sales in the full year ended on April 30, 2021, referred to as fiscal 2020, thanks to a recovery in the second part of the fiscal year. In the full year to April 30, 2020, or fiscal 2019, the company booked sales of €24 million.
“In the second half we had results in line with (fiscal) 2019 and we expect to be close to €20 million in sales in (fiscal) 2020. We had 30 percent of new clients in the second half. Over the next three years we are targeting annual sales of over €25 million, between €25-30 million, thanks to a double-digit growth rate in 2021, 22 and 23,” explains the chief executive, Bruno Conterno, in an interview with Shoe Intelligence. In the first part of fiscal 2020, the top line plummeted by 30 percent due to the impact of the Covid-19 pandemic.
In fiscal 2020, the company significantly reduced its exposure to large Italian and French footwear chains due to an increase in credit risk. It did not release details about the portfolio pruning, but in the past it had disclosed that its Italian clients included Scarpamondo, Pittarello and Scarpe&Scarpe. The decline in sales to key accounts was offset by an increase in online revenues and in business with other brick-and-mortar retailers.
The company expects future growth to be underpinned by its Asian subsidiary, Nice Footwear Hong Kong, which posted sales of $2 million in fiscal 2020 in China, South Korea and Indonesia, as well as by its proprietary brand Kronos, which specializes in sports shoes, mainly in basketball and soccer. Kronos is enjoying a “revival” and saw its fiscal 2020 sales surge to €1.0 million from €0.6 million. Its development was boosted by the hiring of a brand manager and the signing of a partnership with the Turin-based basketball club Reale Mutua Basket Torino, as well as licensing agreements.
Covid-19 has prompted a review of the supply chain
Nice Footwear specializes in the design of sneakers and has created a team of 21 designers at its headquarters in Vicenza, northern Italy. The company produces roughly 70 percent of its shoes in China, 20 percent in Taiwan and 10 percent in Vietnam. “Covid has led us to rethink our supply chain and we are seeking new manufacturing opportunities for some products and we don’t rule out Italy. We have already examined about 10 shoe makers in the Italian clusters of the Marche and Veneto regions and we are evaluating the feasibility of the project in terms of costs and production capacity. Producing in Italy would certainly increase the length of the sales campaign,” Conterno says.
Producing domestically could also enable Nice Footwear to use the “made in Italy” label to enhance the positioning of some of its products. The average retail range price for the Kronos brand is €29-€59 a pair. The group also has four licensed-brands (Ellesse, Conte of Florence, Avirex and Fred Mello) which cover different price points. Ellesse is in a price range of €59-€79, Conte of Florence and Avirex are in a range of €79-€99 and Fred Mello is priced from €120 upwards.
The company achieves about 60 percent of its revenues from so-called “special projects” to design and produce sneakers for “premium international brands.” In this case, Nice Footwear sells the shoes directly to the brands which then distribute them worldwide. Conterno declined to disclose the names of his clients but in previous regulatory documentation released for a €3 million bond issued in July 2020 the company indicated that it had worked with Lumberjack, Dainese, U.S. Polo Assn., Etonic, Skechers, Blauer, Napapjiri, Guardiani, Sparco and Champion.
The remaining 40 percent of revenues stem from the four licensed-brands and Kronos. Sales are carried out by a network of agents and through direct sales from headquarters to large accounts. The company has a showroom located in Via Monte Napoleone, in the heart of Milan’s fashion district and another in Hong Kong on the 11th floor of the Gravity Building in the Kwun Tong district. The showrooms complement the Vicenza head office, which covers more than 1,000 square meters, and houses the R&D and design activities, along with a showroom and the administrative and commercial services.
The Italian market represents about 30 percent of the division’s revenues and the remainder is generated abroad, mainly in France, Switzerland, Greece, Romania and other Balkan countries. Nice Footwear is open to expanding its license portfolio, but is not actively seeking a new brand.
Evaluating an e-commerce platform
The company does not have a proprietary e-commerce platform and digital sales are carried out through marketplaces such as Amazon, Vente Privée and Zalando. To protect its wholesale clients, Nice Footwear claims that it develops ad hoc collections for the e-commerce platforms. “They are exclusive products that we produce avoiding price competition between the retail and online channels,” according to Conterno.
The CEO is evaluating opportunities regarding a proprietary digital platform that would be financed by the bond, which was fully taken up by a sole investor, the Italian investment fund Finint SGR. Nice Footwear has the right to issue an additional €2 million in bonds at similar conditions to the previous placing by the end of 2021. The bonds bear an annual interest rate of 4.375 percent and a six-year maturity.
Nice Footwear also uses temporary stores for direct sales but the business is marginal as the company generally has low unsold stocks.
The proceeds of the bond were also used to develop a proprietary software for 3D design, which has streamlined the design process. The company claims that the time needed for decision-making with brand licensors on product launches has been cut by 80 percent and design costs halved.
Nice Footwear spends about 2 percent of its revenues in research and development, focusing on eco-friendly products and innovative production techniques. It has developed a sole which is 30 percent lighter and better fits the foot’s palm as well as a seamless upper.
Conterno is the only owner of Nice Footwear, but is ready to dilute his stake through a capital increase to finance the company’s growth. He added that he is not proactively seeking an investor. The proceeds of a recapitalization would be used to finance “a couple of initiatives currently underway”. But, Conterno would also be interested in buying a brand, “possibly 100 percent eco-friendly.”