Account gamble
Stepping out with K
John Bull
There are some in the UK shoe industry who say that the manufacturing process should be left to. foreigners who do the job better and cheaper. Whether, in the main, this can be justified, I do not know but one thing is certain and that is that K Shoes, which is a microcosm of the industry — manufacturing, marketing, distributing, retailing — is certainly an exceptional case. It has an outstanding record to boast about, with pre-tax profits rising from 049,000 in 1968 to over E2m in 1972 and turnover increasing from £12.9m to £21.7m over this period.
K Shoes has achieved these results by a successful policy of trading-up and ensuring its full share of the expanding fashion market, particularly amongst dolly-birds prepared to spend a high proportion of their salaries just to keep up with current trends. Also K Shoes maintains a high standard. (I can vouch for this, owning a very presentable pair of waterproof ' creepers ' that must be at least five years old!) Apart from these points, however, K Shoes has benefited from better marketing techniques and cost controls. This much is evident from the 1972 reSults which showed pre-tax margins up by nearly a point to 9.6 per cent and the return on capital at 23.2 per cent. Also the effects of K Shoes' increased capacity have come through well — its factories should soon produce about 85,000 pairs of women's shoes a week and 35,000 pairs of men's and children's shoes. It is also worth noting that the retail side is by no means dependent on the manufacturing division or vice versa with K selling to 2,500 outlets apart , from its 172 shops and the shops account for about a quarter of total sales.
K Shoes has, as I have said, done well from the fashion boom, but it treats this in a sober light and has by no means forgotten its more traditional (and middle-aged group) market. Also outside the UK, K plans to extend its retail outlets in France and Holland and it will be noted that continental prices are much higher than ours.
Under its management team, K Shoes has excelled in an industry not unknown for failures. This year should be no exception and with VAT adding about 14p to a E5 pair of shoes, the effects of preVAT spending should show through in the interim figures.
At 85p the shares are both a good short and long term holding.
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