Budget footwear retailer Shoe Zone will take its first steps as a quoted company when it floats on the junior Aim exchange next month. The high street retailer joins a growing band of businesses enjoying good growth rates in a flourishing value sector.
With more than 550 stores in the UK and Republic of Ireland, Shoe Zone will float by way of a placing to institutional investors enabling chief executive officer Anthony Smith and his brother, chief operating officer Charles Smith, to take some money off the table.
The only specialist value retailer among the top ten UK footwear market players in 2012, according to research from Mintel, Shoe Zone offers investors another way to tap into the structurally-growing value sector. Associated British Foods' (ABF) budget fashion arm Primark posted excellent numbers last week (23 Apr), discounter Poundland (PLND) made its stockmarket debut last month, while value greetings card purveyor Card Factory has flagged (22 Apr) its intention to float on the main market.
Selling over 20 million pairs of shoes a year as well as handbags and shoe-care products, Shoe Zone is able to keep prices low thanks to its scale and buying power, direct sourcing from factories in China and by maintaining a low number of product lines. Last year, the average price of a pair of its shoes was just £9.77, a key selling point in straitened times.
The Leicester-headquartered company looks well placed in a fragmented UK footwear market forecast to grow at a compound average rate of 3.8% between 2013 and 2018. Demographic trends play to its strengths, notably the UK's burgeoning band of school age children whose parents it targets via 'Back to School' ranges, as well as an ageing population ripe for its comfort shoes.
Smith, who has steered the company through two recessions and overseen three major acquisitions, sees scope to open five new UK stores per year between 2014 and 2017. Overseas markets, specifically Poland and Spain's coastal regions, offer additional expansion possibilities.
Somewhat surprising, in that its bread and butter is the sale of cut-price shoes, Shoe Zone boasts a profitable and growing multi-channel business. Online sales grew 27% in 2013, with mobile and tablet traffic speaking for 43% of all visits. During the 12 months to January, the average online transaction value was £18.45, which is 57% higher than the in-store average, helped by a number of 'web exclusive' products, free delivery and returns as well as the ability to order online and collect from a local store.
Shoe Zone, which has appointed DFS boss Ian Filby as non-executive chairman, sets out some decent financials in today's statement. Pre-tax profits rose 66.1% to £9.3 million on sales up 2.4% to £193.9 million in the year to 5 October. At year-end, the company had £6.6 million net cash and no debt, leaving it will placed to fund a progressive dividend.
To learn more about other forthcoming IPOs - read our guide to all the incoming, rumoured and recent market entrants.