Asia gives Jimmy Choo an unlikely boost
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While a majority of luxury fashion retailers are blaming Asia for declining sales and failing to meet profit projections, Jimmy Choo has confounded the market by praising the continent.
Jimmy Choo has reported sustained growth in far eastern markets to deliver 6.1 per cent revenue growth for 2015, to £317.9 million.
“Whereas other players such as Burberry have faltered with declining Chinese demand, Jimmy Choo has been able to deliver impressive revenue growth across Asia,” notes Andrew Hall, an analyst atVerdict Retail.
“The brand’s relative immaturity in these markets has helped to shield it from the decreasing demand and a stuttering economic slowdown in the region. Investment in new store openings and plans for new flagship stores across Asia sets Jimmy Choo apart from its rivals and will continue to reap rewards for the brand.”
Jimmy Choo’s Asian sales rose a staggering 21.2 per cent, more than enough to offset a 2 per cent decline in sales in Europe, Middle East and Africa.
The company reported a pre-tax profit of £22.1million, a significant turnaround on the 2014 loss of £8.2 million. It opened 13 new stores.
In an earnings statement, Jimmy Choo said its Asian business in Asia and Japan is growing well.
“Jimmy Choo’s Asian sales rose a staggering 21.2 per cent, more than enough to offset a 2 per cent decline in sales in Europe, Middle East and Africa.”
“We see significant opportunities to maintain this outperformance in the years ahead. Despite challenging market conditions, we expect continuous operating efficiencies and the dynamism and flexibility of our teams to enable us to drive margin expansion and continue the reduction in leverage and financing costs.”
Said chairman Peter Harf: “Jimmy Choo continues to outpace the sector despite the challenging competitive environment. The company successfully reversed the first half decline in wholesale revenues and remains on track with growth forecasts in Asia and Japan where brand awareness continues to grow strongly.”
However, Hall warns that Jimmy Choo is far from immune to the geopolitical situation: the decline of Russian luxury consumers in Europe, attacks in Paris deterring European consumers, and the weakening of the euro have contributed to disappointing performance in EMEA.
“While the brand has achieved an operating margin of 9.4 per cent, compared to 8 per cent last year, the shoe specialist must be wary of creeping costs as it not only pursues store expansion but invests in omnichannel capabilities and continues to develop a strong social media presence,” said Hall.
“Creative Director Sandra Choi has led a strong year of product design, building upon Jimmy Choo’s British identity to produce seasonal ranges which continue to resonate with consumers across the globe. While attempts to embrace the male market remains a difficult nut to crack, the development of stores aimed at both genders and the strength of new fragrances has seen the brand make headway into capturing a male demographic.”
Hall said Verdict expects Jimmy Choo to continue to outperform the luxury sector in Asia giving it another year of solid total revenue growth.
“However the Chinese market remains volatile and Jimmy Choo should be wary of putting all of its eggs in one far-eastern basket as its grip on European markets loosens.”
Questions & Answers
Q.How much revenue did Jimmy Choo generate in 2015 and what was the profit margin?
How much revenue did Jimmy Choo generate in 2015 and what was the profit margin?
Jimmy Choo reported a total revenue of £317.9 million for 2015. The company achieved an operating margin of 9.4 per cent, which is an increase from the 8 per cent margin reported in the previous year.
Q.What specifically caused the decline in sales for Jimmy Choo in Europe, Middle East and Africa?
What specifically caused the decline in sales for Jimmy Choo in Europe, Middle East and Africa?
The decline in sales in the EMEA region was attributed to several factors. These include the reduction in Russian luxury consumers in Europe, the deterrent effect of attacks in Paris, and the weakening value of the euro currency.
Q.What strategies has Jimmy Choo implemented to achieve growth in the Asian market?
What strategies has Jimmy Choo implemented to achieve growth in the Asian market?
Jimmy Choo has invested in opening new stores and planning new flagship stores across Asia. The brand has also benefited from its relative immaturity in these markets, helping to shield it from broader economic slowdowns and decreasing demand.
Q.What challenges might Jimmy Choo face despite its strong performance in Asia?
What challenges might Jimmy Choo face despite its strong performance in Asia?
The brand faces challenges such as creeping costs due to store expansion and investment in omnichannel capabilities. The Chinese market also remains volatile, and analysts warn against over-reliance on Far Eastern markets as European market grip loosens.
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