Jimmy Choo, one of the world’s leading high brands in the shoe industry, is “going public” as the company officially announced this Tuesday. Its IPO is the first in the high brand shoe industry and gathers wide attention. On the other hand, counter-intuitive to what I thought from its strong brand name, some analysts argue that Jimmy Choo may not be as great of an investment choice.
A pair of gold Jimmy Choo high heels
For one, their profit compared to their revenue lags behind other companies in the high brand industry. Why? The Businessweek quotes Howard Davidowitz stating, “‘you have to carry so much more inventory.’” Unlike clothes where many customers will consider buying even if it doesn’t fit perfectly with the body shape, shoes require a close-to-perfect match between the customers’ feet and the product. And as we know, the more the inventory, the more costly it is to keep it. The nature of the business prevents Jimmy Choo from having low inventory, so the rivals who have apparel shops are likely to be better off.
Some also argue that Jimmy Choo’s IPO “will make the shoes less chic.” Paula Rosenblum claimed that a long-term effect of going public would be “overexposure”, which could “‘reduce its prestige’”. As more and more people demand sales and store expansion, the brand becomes less exclusive and many high-end shoppers turn away.
After reading several news articles, I can’t help but agree that while Jimmy Choo may woo some short-term investors, it may not turn out to be a wise choice in the long-term because of the high risks it carries. Jimmy Choo has to be careful of the strategy they plan to take from now on, and be extra careful that they do not damage the high-brand image they’ve tried so hard to establish in the past 20 years. Especially since the high inventory levels are pressing in on their profits.