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HDFC Securities Research Report
Footwear, like most fashion and lifestyle categories, is fragmenting, with top ecosystem companies losing revenue / Ebitda share (23 footwear companies tracked; over 3/4 of organized pie; growing by cohort 10% compound annual growth rate in fiscal year 15-20).
As buyers increasingly want a multi-brand environment, the ecosystem is becoming more laid back (sports / hobbies-heavy) and distribution-oriented (big plus online).
Retail densities are falling (0 to 5%). Many inefficient brands have hid behind high gross margins to save inflated cost structures, only to worsen their balance sheets; advantage platforms!
We believe that ineffective brands could be forced by platforms to part with part of their margins to drive sales.
In this context, a company’s ability to connect a relevant assortment with relevant distribution at smart prices is the key to a long and healthy history of reinvestment.
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