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Published
Dec 18, 2019
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Hotter Shoes starts to recover from sales and profits falls

Published
Dec 18, 2019

Electra Private Equity has reported its latest set of results and the balance sheet showed that the firm’s Hotter Shoes unit is improving its performance. The brand has “started [its] recovery from a difficult 2018” with a new management team, led by former Start-rite exec Ian Watson, having been put in place during 2019.


Hotter Shoes

 

The company admitted that the market in which Hotter operates is a challenging one but the immediate actions take by the new management team have led to an “improved trading performance”. And the “structural and transformational” changes being made should become “increasingly apparent from the third quarter of 2020”. 

Looking more closely at the Hotter performance, the brand, which is the largest ‘comfort-focused’ shoe brand in the UK, has clearly seen a decline in recent years, but with a nascent upturn, management is confident. 

The sales figures don’t look that encouraging on the surface. In its 2018 year to January 31, its sales were £100.8m, but they fell to £93m in the 2019 financial year to the end of January, while the unaudited figures for the “last 12 months” show sales of £88.9m. 

However, the all-important metric -- profitability -- is returning. In that 2018 financial year, EBITDA was £9.5m, plunging to £3.5m the next year but rising to £6.2m in the last 12 months. The firm’s return on capital employed has also recovered, dropping from 5.9% to 3.4% between the 2018 and 2019 financial years but then returning to 5.9% in the last 12 months.

This has been achieved in a number of ways with a bigger focus on digital being part of that. Online sales are now heading towards a third of total turnover and are growing fast. The appointment of the new CEO, plus Claire Pearl joining from Hobbs as chief product officer, new designers and a data partnership with First Insight to help the company better understand what the customer wants at an earlier stage, are all playing their part too.

The company mainly operates in the UK and abroad through direct consumer marketing, and the parent firm said that in its domestic market and the US there are “demographic changes [that] offer significant opportunities for growth over the long term”. 

Currently 71% of channel profitability comes through direct consumer marketing and delivery with 20% of channel profitability coming from direct marketing and delivery to customers outside the UK. “Further strategic digitisation will increase growth in the direct channels both in the UK and internationally and lead to the realisation of significant cost and marketing efficiency opportunities,” we’re told. 

The company added that it remains committed to Hotter and invested £7.5m in the brand in early 2019 to support its transformation.

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