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Footasylum shares off to an impressive start
Shares in branded footwear and clothing retailer Footasylum (FOOT:AIM) have risen by nearly 25% on their IPO (initial public offering) price in less than a week. Investors are clearly banking on the retailer being the next big thing, helped by having support from several well-known names in the retail sector.
Footasylum was established in 2005 by David Makin, one of the two co-founders of the JD Sports (JD.) chain. JD Sports’ other co-founder John Wardle joined Footasylum as chief executive in 2008; and now hold the executive chairman role.
Barry Bown – JD Sports’ CEO between 2000 and 2014 – will become chairman next summer when Wardle retires.
The retailer operates 61 UK stores in prime high street locations, retail parks and malls, and sees potential for ‘at least 150’ stores, targeting eight to 10 new sites per year.
Footasylum sells ‘on-trend’ branded footwear and apparel aimed at fashion-conscious 16-to-24 year-olds.
While the UK consumer is under pressure, management argue this demographic ‘typically has limited or no dependants’ and a tendency to prioritise discretionary spend on cool-looking clothing and footwear.
That’s good news for Footasylum, which sells well-known third party brands including Adidas, Nike and The North Face, although one risk factor to note is the relationship between Footasylum and suppliers and brand partners are not in all cases governed by signed written agreements.
Encouragingly, Footasylum plans to build global recognition for own brands including Kings Will Dream, sold under a global wholesale distribution contract with ASOS (ASC:AIM), as well as Glorious Gangsta, Condemned Nation and Alessandro Zavetti.
The company’s core fascia is Footasylum, which spoke for 97% of last year’s revenue. Each store is fitted out in a distinctive style tailored to the local market and making use of video, music and photography to create a lively youth-friendly environment.
Footasylum also has a fast-growing e-commerce platform and a wholesale arm for distributing its own brands through a network of partners.
In the financial year to February 2017, sales rose from £110.4m to £147m with EBITDA (earnings before interest, tax, depreciation and amortisation) growing from £6.1m to £11.2m.
Business remains brisk. Sales shot up an impressive 36% to £83.2m in the six months to 26 August 2017.
Footasylum operates in a crowded market and won’t offer dividends short-term. It raised £43.4m before expenses at the IPO. It will spend £18.7m redeeming preference shares and £3.9m to repay a loan made to the company by the current chairman.
The rest of the IPO cash will support growth efforts which include upgrading IT systems and opening new stores. (JC)