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A week in fashion: Specialists need to find their feet

It's been another week of shoe news with the collapse of Dolcis and Faith wielding the axe on up to a quarter of its staff in head office. At the other end of the spectrum though the competition to buy Kurt Geiger is hotting up with five private equity companies battling for exclusivity on the deal.

The report issued by Verdict Research today shows just how much of a mess the footwear sector is. Although the market as a whole grew by 4.6% in 2007 the specialists lost even more share - down from more than 50% in 2001 to just 41.8% in 2007. Verdict Research blamed increased costs pressures and increased competition from the clothing chains for their demise. Clothing retailers have seen their share of the market grow from 24.4% in 2002 to 29.6% this year and the grocers have taken their share from 3.5% to 5% in the last five years.

A question mark still hangs over the future of Stead & Simpson although a decision about the future of the company is expected to be finalised by the end of January. I heard a tale of one supplier owed more than £50,000 by the company - his business will go under without this payment. Another supplier is owed more than £70,000 and there are rumours of middle-market comfort brands with warehouses full of thousands of pairs of shoes that were once destined for Stead.

All this adds up to bring yet another horrendous season for the specialists. If Dolcis administrator KPMG decides to discount heavily then sales will be hit at a similar level to when Ravel shut down and flogged its stock off at £10 a pair last season. Meanwhile the market could be flooded with cheap shoes if brands are forced to clear the stock they still hold for Dolcis and perhaps Stead & Simpson. Certainly the specialists would do well to make sure they, rather than rival clothing chains get hold of this pairage.

Despite these numerous tales of woe, there are still many footwear specialists surviving and thriving. I visited Schuh's head office in Livingston yesterday who told me they expect to report EBITDA of £11.75 million this year - impressive in such a difficult market. Meanwhile LK Bennett is reported to have taken her margins from 58% in 2006 to a market-busting 69% in the last 12 months, fuelling founder Linda Bennett's hopes of selling the business before the new Capital Gains Tax regime kicks in this April. Whether the deal will fetch the rumoured £150m asking price is another matter.

Similarly Kurt Geiger saw sustained sales growth in 2007 and has captured the interest of several private equity funds eager to step out of the middle-market and firmly into the more insular and protected luxury retail during the economic downturn.

Yes, the demise of Dolcis this week is a sad story and the inevitable job losses will hit the footwear sector hard in the short term. However too many footwear businesses have been falsely sustained by private equity houses pumping in cash in recent years and the disappearance of some of these will simply serve to strengthen the UK footwear market as a whole. If they are smart, the remaining specialist players should be able to secure the market share up for grabs making them stronger businesses individually. And good businesses always need good people...

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