Jimmy Choo PLC (CHOO)

Source: Jimmy Choo website

I read all 202 pages of the Jimmy Choo PLC prospectus over a few days and was pretty hyped up over the IPO. But with the market reacting badly in the days running up to its IPO launch, we cancelled our order to buy the shares. Boy, was I glad we did as the shares hardly moved on its first day of trading! It started at 140 pence which was the lower of the guiding price range of 140 to 160 pence.

I figured that if ACCICB wasn't working on Friday, he could monitor the stock and who knows we can make some money at the peak of 146 pence and then run away! But of course that didn't happen as work gets in the way so we just tracked the stock instead. As I am writing this, the current price is at 145 pence.

Jimmy Choo if you haven't already know is a accessories brand with products ranging from women and men shoes, women handbags, small leather goods, sunglasses, eyewear, fragrance and soft accessories. It operates in the global luxury goods market and is especially strong in the women shoes segment. It has been noted that shoes and leather goods segment has been growing over the past few years as more people ditch buying the latest high end clothes and instead choose shoes or bags to dress up their outfit so that they still look fashionable but at a fraction of the cost. It helps that luxury shoes have been getting a lot of attention and publicity from the mainstream media such as songs, movies, dramas and what not. Thus if you don't know about Choo or the other two heavenly kings of luxury shoes, Louboutin and Blahnik, you must be sleeping under a rock. 

Despite the current less than stellar outlook of the luxury industry, it is likely that the stock price of CHOO will perform well over the mid to long term. This is a growth stock as there's no plans to pay any dividends for the moment with the IPO funds being used for growing their number of stores, refurbishment of existing ones and repayment of debt. Good news is that they are midway through these plans so value has already been added to the company before it was put up for its IPO.

This is well thought of and in a way the least you can expect from JAB who is backed by the German billionaire Reinmann family and not a newcomer to owning luxury companies. The Reinmanns shall continue to be the main shareholder as they still own the majority of CHOO after the IPO. Thus selling a small stake of CHOO is probably justing testing the market to determine the valuation of the company. Liquidity of the shares could be an issue as trading volumes could be low due to the bulk of the shares being subscribed by the institutions.

However, I prefer CHOO to Burberry and Mulberry which are also listed on LSE. It seems all the "berrys" are doing badly as Mulberry languishes with its back and forth strategy of trying to go upmarket and then back-pedalling when they fall on their face. As for Burberry, I do quite like this stock but haven't had the time to delve into it. ACCICB went to do some research on it and he told me it's a no go. Recent news on Burberry have shown that the tough environment is hurting their margins thus buying into the stock now may mean a long waiting period before gains can be harvested. 

On a side note, Christian Louboutin and Manolo Blahnik are still privately owned although I do wonder whether this Jimmy Choo IPO would make them think of doing the same. Both shoe designers (Louboutin -51, Blahnik-71) are no longer young men and succession should have been planned or has already been carried out. It may be tough though as the brand is named after themselves, much like Jimmy Choo in the past.

I have noticed the difficulty of a luxury brand's continuous success after its namesaked designer dies or retires or quits or is no longer in charge of the design of the brand. It usually flops although there are exceptions like Valentino and Alexander McQueen who have protégés trained under the original designer as well as a wealth of archives for references. Sandra Choi, niece of Jimmy Choo is currently the Creative Director  of Jimmy Choo PLC and her long history with the brand would mean there's continuty and yet she has been seen putting her own spin with the launch of Choo.08 collection. 

There were a few troubling points as well as bright spots in the prospectus and overall I concluded that this would make a nice addition into our portfolio. Now it's only a matter of time and price before it happens.