Through a contract with First Insight, Hotter Shoes, the largest remaining shoe manufacturer in the U.K. since 2010, is adopting new consumer-driven predictive analytics to make more accurate design, purchasing and pricing decisions on the new styles of comfort shoes that it will offer to the market.
In disclosing Hotter's results for the financial year ended on last Jan. 31, which show higher profit margins on declining sales, Electra Private Equity said it was still committed to support it, indicating that further digitization is expected to promote growth in its direct-to-consumer channels in the U.K. and internationally, while providing significant opportunities for cost and marketing efficiencies.
The tools provided by First Insight will provide real-time insights into customer preferences, pricing and attitudes toward potential product offerings, indicating which items are likely to perform best. The customers' feedback will be collected through product tests and in other ways.
The new digitalization program is led by Ian Watson, who was appointed as Hotter's new chief executive in March, and by Claire Pearl, recently appointed as chief product officer. She is being assisted by new designers.
Hotter relies on e-commerce and its network of 80 single-brand stores in the U.K. for 60 percent of its revenues, which are mainly generated in the U.K. and the U.S., with online sales representing nearly one-third of the total turnover. Its shoes are made at its own factory at Skelmersdale in the U.K. at a rate of 14,000 pairs per day.
Electra, which made an investment of £7.5 million (€8.8m-$9.8m) in Hotter at the beginning of this year, reported that the shoe company's sales declined to £88.9 million (€104.3m-$115.6m) in an unspecified recent rolling period of 12 months. This compares with a turnover of £100.8 million (€118.3m-$131.0m) in the financial year ended in January 2018 and £93.0 million (€109.2m-$120.9m) in the year ended in January 2019.
On the other hand, Hotter's profitability improved in the latest 12-month period with Ebitda of £6.2 million (€7.3m-$8.1m), up from £3.5 million in the year ended on last Jan. 31, without reaching the level of £9.5 million recorded in the prior year.
Electra pointed out that 91 percent of its profitability is coming from direct consumer marketing and delivery, with shares of 71 percent for the U.K. and 20 percent for the rest of the world. It blamed the declining revenues to the difficult situation in the British real estate sector.