In a further move in the rapid consolidation of the British shoe retailing sector, Stylo plc has taken over some of the assets of the bankrupt Dolcis chain of shoe shops. The parent company of Barratts, which has been a major rival of Dolcis, has only bought the Dolcis brand in addition to 24 stores and a number of concessions.
Meanwhile, Kurt Geiger, the upscale chain of shoes shops and concessions, has found a new equity investor. Graphite Capital of London, which has investments in other British retailers such as Jane Norman, is supporting a new management buy-out by the company’s chief executive that values Kurt Geiger at £95 million (€126m-$187m).
Barclays, which had supported a previous management buy-out by Clifford in 2005, has cashed out of its investment in 72 percent of the shares with a capital gain, considering that it had paid £46 million (€61m-$90m) for that stake. Graphite will own 70 percent of Kurt Geiger. The balance will be shared by Clifford with other of Kurt Geiger’s management team including Rebecca Farrar-Hockley, creative director; Dale Christilaw, finance director, Sally McClymont, retail operations director; and Andrew Lee, wholesale and licensing director.
Geiger is going ahead with its retail expansion, planning new stores in Leicester, Bristol and the White City shopping area of London. The chain, which operates 16 stores and a number of concessions, has laid out an ambitious development program (see Shoe Intelligence of Aug. 14, 2007).
It has reported a 5 percent increase in its comparative store sales for the 2007 financial year, ended on Jan. 31.In the latest financial year, ended on Feb. 3, 2007, the company reported operating profit before depreciation and amortization (EBITDA) of £8,059,000 (€11,903,000-$16,211,886) on revenues of £130.1 million (€192.1m-$261.7m).
As reported in the previous issue of Shoe Intelligence, Dolcis went into administration, a form of Chapter 11 bankruptcy, on Jan. 21. About half of its 185 stores closed that day, leaving only 95 open, and some 60 other locations were reportedly shut down soon after. Stylo, which also owns the Shellys and PriceLess footwear retail chains, has bought 10 Dolcis stores and will run another 14 temporarily while it sells their stock.
Michael Ziff, chief executive of Stylo, has been quoted as stating that the Dolcis brand will still appear on some shoes marketed by his group, but the name would vanish as a store banner. The remaining 10 Dolcis stores will be rebranded as Barratts Shoes.
Officials of KPMG, which handled Dolcis’ insolvency, said that around 40 different parties had expressed an interest in parts of Dolcis, which was previously spinned off by Alexon Group at a ridiculously low price. They said the sale to Stylo represented an excellent outcome of Dolcis’ protracted saga, particularly in view of the difficult market conditions in which the deal had been negotiated.
According to Verdict Research, the British market research company specializing in the retail sector, eight of the top ten specialty footwear retail chains in the UK suffered a loss or a drop in their profit margins in 2006, and this trend continued in 2007. It was apparently most acute in the mid-market segment, reaching dramatic proportions before Christmas.
According to recent reports in Drapers magazine, several other shoe retailing companies, particularly certain chains that have small stores with a meager assortment, are more or less officially up for sale right now in the UK, where fashion chains and department stores are gaining market shares in footwear.
We already reported in the last issue on the takeover of several assets of Stead & Simpson by Shoe Zone, which previously bought Shoefayre. Sir John Hunter, the Scottish entrepreneur behind West Coast Capital who has been contemplating a bid for Saks Fifth Avenue in New York, is now reported to be seeking a buyer for a loss-making trendy footwear chain, Qube, and for most his other small properties, including the better-off Office chain. His company has just sold a young fashion chain, D2.
A chain operating in the upper segment of the market, LK Bennett, is reportedly close to being sold, but perhaps not at the same conditions as before in spite of their relatively better recent scores. The 74-store LK Bennett chain, which is set to open new doors on London’s Regent Street and in Guildford, has reported a 5 percent increase in same-store sales for the four weeks ended last Jan. 6.
Phoenix Equity Partners and a British fashion retailer, Hobbs, are reportedly among those interested in the chain founded by Linda Bennett in 1990. In the meantime, Kurt
Patrick Cox is said to be contemplating the sale of his company after failing to negotiate a licensing agreement with House of Fraser. Some other players in the market are restructuring. Faith, which recently came under the ownership of Bridgepoint Capital, has cut 10 percent of the staff at its head office, justifying the move with a similar previous cut in the number of SKUs and the introduction of new systems. The chain was said to be doing well, with same-store sales up by 4 percent in December and by 9 percent in January.
At the same time, industry veterans are working on new initiatives and concepts. David Casey and Richard Wharton, co-founders of Office, are behind a new premium retail format, called Author, which is just now opening its pilot store near Pall Mall in London, carrying mostly women’s footwear brands such as Freelance, Pura Lopez, Terra Plana and United Nude.
John Egan and his former partners in Shoe Studio Group, Don McCarthy and Stefan Cassar, are also rumored to be contemplating some kind of deal. McCarthy and Cassar left SSG when its parent company, Rubicon, was sold to Mosaic Fashions. Egan is now leaving as SSG’s chief operating officer, but he remains as a shareholder of Mosaic. Amanda Burrows will take over his role until the nomination of a successor.
According to figures compiled by the German shoe industry association, HDS, with the equivalent of €410 million spent in 2006, apparent consumption of footwear is higher in the UK than in Italy or in Germany (see the chart at the bottom of this article, which doesn’t include the high-consumption French market).
However, HDS points out, independent shoe retailers only have a 5 percent share of the British market, which is dominated by large chains. In our opinion, combined with the high cost of renting retail space and paying the personnel, this augments the competitive pressure, squeezing margins, and makes it difficult to set up a buying group and to work with brands, instead of carrying mostly private label.