Jimmy Choo celebrates after winning year despite sluggish Americas business
“Accelerating retail growth and margin expansion”. That was the very pleasing headline that must have made Jimmy Choo shareholders smile on Thursday morning as the luxury footwear brand reported a strong 2016.
Its preliminary results for the year to December 31 painted a picture of a business strengthening as each period went by with the company reporting revenue up 14.5% and improving retail momentum in the second half.
The Americas may still have its problems, but the general picture globally was one of strong sales increases.
But even better than that, profits grew faster than sales, proving that Jimmy Choo was able to wrest higher earnings from each pair of shoes or luxury bag it sold, after one-off profit-denting isues were factored-out of the picture.
In fact, adjusted Ebitda grew by 15.7% to £59m, driven by strong sales growth, margin improvement and lower growth in overheads. The adjusted Ebitda margin was up 20 bps to 16.2% and operating profit surged 42.6% to £42.5m.
While adjusted consolidated net income for the year was up to £24.3m from £19m, in overall reported terms, profit for the year was down to £15.4m from £19.4m, hit by a one-off loss linked to a loan facility arising from foreign exchange translation.
So what went right for the firm last year? Quite a lot. Continued strong growth in Asia, solid growth in Europe and Japan and improving trends in US retail were all bright points. And they managed to offset the planned reduction in US wholesale that many luxury firms are focusing on at present as they re-align their dealings with discount-happy American department stores.
In the brand’s 20th anniversary year, it said a number of other initiatives also helped. It launched key new styles in seasonal fashion and core ranges, and saw particular success with its luxury Miami trainers.
Shoes currently represent 75% of total sales and growth here was helped by those new launches. The company said that the breadth of its product range “allows us to capture trends” presumably meaning athleisure that would have led to the new trainer’s strong sales.
It also did well with its anniversary Memento collection of 20 brand-defining shoes and bags that “re-imagined’ its archive and added personalisation features via a customisable limited edition accessories trunk designed to house the collection.
Personalisation also figured in the Cruise 17 collection with a capsule offer of customisable jewelled shoes and bags that included Swarovski crystals, floral and vintage star-inspired button charms, plus pearl, diamanté and pompom brooches.
And the company added new products with its Choo 24:7 offer “with shapes and styles which had a significant impact from the second quarter of the year.” These included the new Romy shoe, with its softer toe point and new heel construction, and the Ren, an on-trend twist on the classic Jimmy Choo caged sandal.
In bags, its Lockett model was further developed and continued to see strong sales, while it made more progress in men's shoes and accessories, with men’s remaining its fastest growing category and now accounting for 9% of revenue.
Licensed products enjoyed further “strong growth” too with last year seeing the launch of the Man Intense and Illicit Flower fragrances. And Choo extended its Safilo eyewear licence until 2023 with men’s eyewear due to debut next year.
On the retail front, the brand continued to invest in re-platforming and omnichannel and the continued rollout of New Store Concept was also important with its directly operated store count rising by 10 to give it 150 owned locations. As well as the 10 new sites, 16 existing stores were revamped so that more than 45% of its store portfolio is now ‘new concept’.
CEO Pierre Denis called it a “landmark year” and was upbeat for the business around the world, but especially for Asia where he said the brand is “under-penetrated.”
In fact, that landmark year saw it winning multiple awards globally and also getting plenty of exposure in Asia via the Japanese TV drama Seisei Suruhodo, Aishiteiru, based on characters working in the luxury industry.
Its Asia strategy is certainly yielding results with sales in the region outside of japan growing 33.4% or 19.2% currency-neutral and 31.8% or 6.2% currency-neutral in Japan. China, Hong Kong, Singapore, Malaysia and Japan were all standout markets and it saw “continued notable growth” in its men's business in Japan.
Europe and the Middle East were strong too, with a 16.3% rise or 6.7% currency-neutral, boosted by the weakness of the pound. And even though the impact of geopolitical events reduced tourist spend and slowed sales in mainland Europe, an improved trend built throughout the second half.
The Americas was the weakest region. It saw revenue dropping 1.7% or 13% currency-neutral as luxury struggled there and department store sales fell. But the company is focusing heavily on its US business with a new Soho, NYC store, the relocation of its Madison Avenue store and is working closely with its wholesale partners.
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