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Why Footwear Brands Like On and Allbirds Are Driving the Retail IPO Boom

As the footwear industry grows, shoe brands are among the companies clamoring to go public.

In August alone, footwear brands Allbirds and On filed for initial public offerings with the Securities and Exchange Commission. Authentic Brands Group, which owns various footwear brands including Nine West, Juicy Couture, Frye, Eddie Bauer, Tretorn and more, filed for an IPO in July. Plus-size retailer Torrid, which also has a footwear line, filed for an IPO in the same month.

According to experts and analysts, certain trends are spurring these footwear-focused IPOs. Retail — particularly footwear — is in a strong position right now. Across the board, major retailers and footwear brands have posted sales increases and earnings beats in Q2, highlighting recovery across the industry. In many cases, this quarter reflected record-breaking numbers, which has spurred a renewed desire to invest in retail.

“Investors are looking for companies with strong growth potential,” said senior sports industry adviser for The NPD Group Inc. Matt Powell. “The footwear business is strong right now, so there is a lot of interest.”

On and Allbirds both highlighted strong growth history and potential in their filings with the SEC. On, the Swiss footwear brand backed by tennis champion Roger Federer, described itself as “one of the fastest-growing scaled athletic sports companies in the world,” with net sales growing at an 85% compound annual growth rate. Allbirds also highlighted growth, with net revenue going from $126 million in 2018 to $219.3 million in 2020. However, the company also revealed a net loss of $25.9 million in 2020.

Given the strength of the industry, Powell expects to see more footwear brands go public in the future.

The recently strong performance in retail can, in part, be attributed to the impact of stimulus checks, pent up demand, and higher prices from supply chain bottlenecks, explained BMO Capital Markets Analyst Simeon Siegel.

“Retail is having its renaissance moment,” Siegel said. “And therefore, companies that have been in the private market are seeing that same revenue benefit. And that has translated into higher valuations across the public retail landscape.”

In an interview with FN last September, ABG founder and CEO Jamie Salter said more footwear brand acquisitions were a possibility. For companies like Authentic Brands Group with large brand portfolios, having footwear brands can be beneficial when it comes to opportunities for growth and profitability. As Siegel explained, “footwear stretches the addressable market size and stretches the revenue opportunity.” However, smaller margins in footwear can also make it more challenging to turn profit.

Whether apparel or footwear, brands must looking to launch a successful IPO must be able to prove growth, recurring revenue, resonance, loyalty, and customer centricity. A focus on e-commerce and sustainability is important as well.

In Allbirds’ August filing, the company said it hopes to lead the way for a “Sustainable Public Equity Offering, or SPO,” which works with third-party organizations to make sure companies have well-defined environmental and social goals as they go public.

“ESG (environmental, social, and governance) is highly being looked at,” said Jessica Ramirez, retail research analyst at investment research firm Jane Hali and Associates. “And I think from the investor side, there are just a lot of firms focusing on ESG and how to make that better.”

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