Footwear Sector Check - No Bargains Here: HDFC Securities
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HDFC Securities Research Report
Footwear, like most fashion and lifestyle categories, is fragmenting, with top businesses within the ecosystem losing revenue/Ebitda share (23 footwear companies tracked; more than 3/4th the organised pie; cohort growth 10% compound annual growth rate over FY15-20).
As shoppers increasingly want a multi-brand environment, the ecosystem is becoming more casual (sports/at-leisure-heavy) and distribution-led (wholesale plus online).
Retail sales densities are thinning (0 to down 5%). Many inefficient brands have been found hiding behind high gross margins to save ballooning cost structures, only to worsen their balance sheets; advantage platforms!
We reckon inefficient brands could be arm-twisted by platforms into parting with a portion of their margins to boost sales.
Against this backdrop, a company’s ability to connect relevant assortment with relevant distribution at smart price points is key for a long and healthy reinvestment story.
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