Vivarte announced on Tuesday that it has entered exclusive negotiations for the sale of André, the well-known French chain of urban shoe shops that was at the start of the group, to Spartoo, one of the two leading French online shoe retailers along with Sarenza. The move supports the notion that an omni-channel solution may be a viable alternative to traditional shoe retailing and the approach of pure e-tailers like Amazon or Zalando, which are also exploring investments in physical stores.

Spartoo has been anxious for some time to develop a hybrid business model. After opening its first physical store in 2015, it announced a goal to set up a chain of 100 stores by 2020, and it currently has 15 units. In 2016, it was among the bidders for the languishing French network of Bata shoe stores, which ended up being dismantled.

With the takeover of André, Spartoo will become the only major French shoe retailer with a balance between its online business and its physical stores, generating annual consolidated sales of around €250 million.

While Spartoo has continued to grow in the last few years, reaching a level of €175 million in 2016, sales have shrunk by around 30 percent since 2013, down to €124 million, due in part to some 30 store closures intended to eliminate its losses. About half of Spartoo's turnover comes from customers located in 25 countries outside France.

Founded in 1986, André has a total of about 200 stores, including 116 directly operated units. Of those, 165 are located in France.

Spartoo has agreed to take over practically all the stores of André, many of which are in excellent urban locations, as well as their employees. They will continue to operate under the André banner and will continue to sell André's own shoe collection, but they will also start offering some international brands like Geox, Adidas or Vans, and more children's shoes.

Earlier this year, Spartoo won a bid for the takeover of GBB, the French specialist producer of children's shoes, from the bankrupt Kindy group (see Shoe Intelligence vol. 19 N° 11+12 of June 9, 2017). In addition to the GBB brand, the company also has another one, Achile, and is the licensee for Catimini and IKKS. While maintaining its focus on shoes, Spartoo started offering also clothing online in 2013.

The André stores will also act as click & collect points for orders placed on Spartoo's online platform. The personnel in the stores will use tablets to show alternative products from Spartoo's wider collection of branded and private label items to visiting customers.

 Spartoo is pledging to invest between €10 million and €15 million in the next three years to set up an IT system for André and to modernize between 50 and 60 shops.

Pending approval by regulatory authorities and other entities, the takeover should be concluded during the second quarter of this year. Vivarte gave its preference to Spartoo's proposal over a management buyout by the manager of the André chain, Pascal Poulain.

According to a report that could not be confirmed, Vivarte may have to put some money on the table to finalize the deal, opening the possibility that it will become a shareholder of Spartoo. Founded in 2006 by its chief executive, a young entrepreneur who is now 35 years old, Boris Seragaglia, and two other investors, Spartoo, has gone through several rounds of financing that have diluted the founders' shareholding to 25 percent.

While confirming the group's financial turnaround at the operating level in the fiscal year ended last Aug. 1, Vivarte's chairman and chief executive, Patrick Puy, also announced the group's decision to put up for sale one of its two remaining chains of low-priced shoe retail chains, Chaussures Besson.

With more than 130 stores, Besson was profitable last year on sales of €265 million, but Vivarte's management concluded that it could cannibalize La Halle, the group's much bigger, loss-making chain of low-priced shoes and clothing, which is being restructured. With more than 80 million items sold in its 871 remaining stores, located for the most part in suburban areas, La Halle generated sales of €929 million last year, representing 53 percent of Vivarte's total turnover.

Similarly, André has been competing with another French chain of upper and medium-priced shoes shops, Minelli, which Vivarte has decided to keep because it is profitable. It also has some stores outside France.

Besides André and Besson, Vivarte is also selling a brand of women's sportswear, Naf Naf. The buyer is going to be a Chinese group, Shanghai La Chapelle Fashion Co. With a network of nearly 500 stores around the world, including 220 franchises, it generates an annual turnover of about €200 million.

Vivarte wanted to divest Chevignon, a brand of men's sportswear, but it's going to keep it having failed to find a buyer. It will therefore remain with just six brands or banners. Besides La Halle, they are three chains of urban shoe shops – Minelli, San Marina and Cosmoparis – which together generated sales of €271 million last year, and a women's ready-to-wear brand, Caroll, with sales of €260 million.

As previously reported, Vivarte already sold in the last few months its shoe manufacturing subsidiary, Compagnie Vosgienne de la Chaussure (CVC); a footwear brand, Pataugas; a fashion brand, Kookai; and its Spanish shoe retailing subsidiary, Merkal.

The final figures for the past financial year show that Vivarte improved its Ebitda for the first time in many years, reaching a level of €84 million, compared with €54 million in the previous year, on sales of €1.8 billion. Its net losses were more than halved, moving down to €305 million from €672 million in the previous year.The management has predicted that Vivarte will further improve operating earnings to around €100 million this year, and that it will have a net profit.

Vivarte ended the past financial year with equity of €253 million and net debt of €564 million, thanks to a major refinancing program. The group's 172 creditors agreed last June to give up €864 million worth of debts. As a result, the net debt was reduced to a ratio of 4.7 times Ebitda from 18.5 times Ebitda in the previous year. The debt situation has allowed the management to allocate an investment budget of €80 million for the current financial year.

After closing hundreds of stores, the group opened 17 new ones between September and November 2017 including three Besson units, three La Halle stores, four Minellis, three San Marinas and one Cosmoparis. As of now, the group operates 2,247 points of sale, about 1,900 of them in France.