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By Oren Laurent
President, Banc De Binary
It has won over top celebrities and Hollywood stars. But can it now appeal to British investors? A range of political and economic factors have contributed to slowing growth among many of Europe’s largest luxury brands and top fashion houses. Yet, in the midst of this wavering sales scene, rumour has it that Jimmy Choo may be seeking to move forwards with an IPO later this month.
A trusted source revealed to Reuters that the luxury shoe brand will be pledging to expand in Asia and elsewhere in order to achieve industry-beating annual sales growth or over 10%. Famous for adorning the feet of the rich and famous, the firm’s average annual sales growth has consistently stayed around the 15% mark for the last three years. If successful, its IPO could value the company at over $1.14 bln and make it the third luxury brand to feature on London’s stock market after Mulberry and Burberry.
Is it brave or foolish for this British brand to consider launching its IPO at a challenging period for luxury retailers? The industry has been facing a slowdown in growth since the second half of 2012, and the sales growth of its main listed stocks fell an estimated 5-6% this year, largely due to shrinking demand from their Chinese and Russian fans.
The Chinese have traditionally had a huge appetite for luxury goods and in 2011 growth in luxury spending on the mainland rose 30%. The number of millionaires is rising all the time, and the new middle classes view designer items as a way of showing off to their peers that they’ve made it. Although the Chinese were credited with one third of all luxury purchases in 2013 and travel retail is booming, domestic sales have been hindered by the government’s campaign to curb business gift-giving and by hikes in import taxes. A number of high-end brands were left with no option but to cut prices.
Simultaneously, the industry is experiencing reduced demand from Russians. The current conflict in the Ukraine, combined with a weakening rouble, means that fewer Russian shoppers are travelling abroad and splashing out in the expensive department and brand stores in Europe’s cities.
However, insiders suggest that Jimmy Choo is standing tall and confident. The company will be arguing that despite the current industry trends, its future growth rates will remain positive, and that the high-end shoe market is a fast growing sub-category within the luxury goods sector. It plans to continuing opening around 10-15 stores a year globally as it has done over the past years, with a focus now on Asia where its current presence is relatively small.
Depending on the exact terms of an IPO, the pull of its stilettos and leather goods could help to raise up to 200 mln pounds. The coming weeks will be telling, but don’t be deceived by the bigger picture about the luxury sector. There is an exception to every rule: it is very possible that this popular brand may be able to convince British investors that it has what Asian shoppers want.
