Who Should Buy Kurt Geiger? Analysts Weigh In.

Kurt Geiger, one of the most bought and sold companies in the business, could soon be changing hands again.

Earlier this week, the Telegraph reported that the U.K.-based shoe retailer’s private equity owner has been in preliminary sale talks with several American companies, including Steve Madden, Tapestry and Capri Holdings. Kurt Geiger is the U.K.’s biggest shoe retailer by sales, and the deal could potentially be worth upwards of £450 million (about $589 million).

While the discussions are reportedly still in their earliest stages, a U.S. owner would be familiar territory for Kurt Geiger, which was under the umbrella of the now-defunct brand management company, The Jones Group, from 2011 through 2014. (The latter was acquired by the New York private equity company Sycamore Partners.)

Kurt Geiger, which operates its own brand and runs shoe departments at Harrods, Selfridges and Liberty, was sold to its current owners, U.K.-based Cinven, in 2015 for £245 million ($322.7 million).

Could another deal be on the table soon? Some analysts think there’s a good chance.

“A lot of these American companies are starting to want to grow and become more prominent in their portfolios,” Jessica Ramirez, an analyst at retail investment research firm Jane Hali & Associates, told FN.

She pointed to Capri Holdings’ $2.12 billion acquisition of Versace that closed at the end of last year as evidence that U.S. fashion conglomerates — while still nascent compared with their European counterparts — are beginning to look across the pond for potential targets.

While Michael Kors’ parent company seemed to some at the time like an unlikely fit for the Italian fashion house, the partnership seems to getting off to a good start. Last quarter, Capri beat earnings expectations and raised its full-year revenue outlook, and is planning a splashy accessories rollout at Versace for spring 2020.

Ramirez said that initially she had thought Tapestry would be a good fit for Kurt Geiger, since the Coach owner could benefit from the brand’s more upscale offerings, but the company has faced production and management issues throughout the past year at Stuart Weitzman, so adding another footwear brand might not be in its immediate plans. (A spokesperson from Tapestry declined to comment, citing a policy against commenting on rumors and speculation.)

Steve Madden, however, has had no such issues: The footwear giant saw its revenues jump 7 percent to $1.65 billion in 2018, and its first-quarter results blew past Wall Street’s expectations. On the company’s last earnings call, CEO Edward Rosenfeld said the team was looking at “adding additional brands to the portfolio,” either through licenses or acquisitions. “We’d like something that’s complementary to the existing brands in the portfolio,” he added. “So we’d be most interested in [brands that target] a price point or a demographic or a category where we have less penetration today.”

Wedbush Securities analyst Christopher Svezia told FN that Steve Madden would “absolutely be on the list” of potential buyers for any shoe brand looking to sell, though he said that he had no knowledge of any acquisition talks.

He also said that a deal of this size would be a major undertaking for the company — far bigger than any of the acquisitions it has made in recent years — and Kurt Geiger’s reliance on brick-and-mortar retail (it has more than 80 stores in 20 countries, plus 240 concessions) is somewhat out of step with Steve Madden’s focus on digital growth.

That same prowess could make it an appealing prospect for Kurt Geiger, however. “Steve Madden has been able to keep afloat of trend in general and trend as far as digital goes, which I think Kurt Geiger needs some help with,” said Ramirez, pointing to Steve Madden’s 2.2 million Instagram followers compared with Kurt Geiger’s 305,000. The brand “could use a buyer that can elevate them to their potential” online, she said.

Last July, Kurt Geiger relaunched in the U.S., targeting wholesale and e-commerce, rather than owned stores. The brand rolled out in 100 department stores and online destinations, including Nordstrom, Dillard’s and Zappos.com, as part of an expansion spearheaded by international director Steven Sousa, a former top Michael Kors exec. At the time, the company told FN that it expected annual revenues of more than 370 million pounds ($485 million) by the end of 2018.

Analysts expect the opportunity to drum up considerable interest. “The high-end footwear category continues to interest many investors as it has less seasonality than apparel and a potential for great margins,” said Ludovic Grandchamp, a partner at the London-based advisory firm Savigny Partners LLP.

But the owner will need to have deep pockets. William Susman, managing director at Threadstone Advisors, a retail-focused advisory, said that any eventual buyer would need to be “willing to invest heavily to build a luxury brand.”

Capri Holdings and Steve Madden did not respond to a request for comment. Cinven and Kurt Geiger declined to comment.

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