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SEB Investigates
Corporate Research
Footway Group
NOT TO BE DISTRIBUTED IN, OR TAKEN OR TRANSMITTED INTO, THE UNITED STATES, CANADA, JAPAN, AUSTRALIA OR IN ANY OTHER
JURISDICTION WHERE TO DO SO WOULD BE UNLAWFUL.
Company Update Retail Sweden 19 May 2021
The online specialist
Footway Group, including Sportamore since 2020, has built a strong position in
the online footwear and sportswear markets. On its highly automated AI-based
platform, Footway operates seven retail concepts in 24 European markets. We
expect it to outgrow its peers with strong margin progression. We initiate
coverage with a midpoint DCF value of SEK 39. The peer discount – the equity
value is 1x 2022E EV/Sales – is excessive because Footway is under-analysed.
Key Data (2021E)
Price (SEK) 23.90 Footway Group: built on scale for a SEK 10bn vision
Reuters FOOTb.ST Following several acquisitions in recent years, notably of Sportamore in 2020,
Bloomberg FOOTB SS
Footway Group today operates seven online retail brands in 24 markets across
Market cap (SEKm) 2,085 Europe. Its automated technology platform – with all brands using one backend and
Market cap (USDm) 252 one front-end system – allows for a dedicated focus on customer contact and
Market cap (EURm) 206 satisfaction, where the company is consistently highly ranked. We estimate
Net debt (SEKm) 239
Footway Group’s total addressable market at EUR 360bn a year (of which the
Net gearing 39%
Net debt/EBITDA (x) 7.8 Nordics represent about 4%) and we reckon accelerating online migration could
drive a CAGR of 13-14% in the online segment to 2023. In 2023 we estimate sales
Shares fully dil. (m) 87.2 of almost SEK 3bn, while its vision remains SEK 10bn in total platform revenues.
Avg daily turnover (m) 0.0
Free float 28% Earnings forecasts reflect strong growth and margin progression
We forecast 2021 sales of SEK 1.6bn growing to SEK 2.9bn in 2023, equal to a
CAGR of 32%, the highest in its online peer group. Adding synergies of SEK 100m
from Sportamore’s acquired assets to this sales growth, we expect operating
leverage to bolster EBITA margins too: from 2% in this year to 4% in 2023.
Coverage initiated with a SEK 33-45 equity range – midpoint of SEK 39
Based on a CoE of 6.5%, a WACC of 6.1% and a steady-state EBIT margin of 4%,
we arrive at a fundamental midpoint DCF-based equity value of SEK 39 (range of
SEK 33-45) per Footway Group share. At our midpoint valuation, Footway Group
would trade at 1.6x 2022E EV/Sales putting it at a reasonable 30% discount to its
peer group average, which is appropriate due to its small market capitalization.
Share Price (12M) Financials (SEK)
Year end: Dec 2019 2020 2021E 2022E 2023E
35 Revenues (m) 991 1,089 1,639 2,203 2,868
30 Adj. EBIT 26 7 (12) 26 68
Pre-tax profit (m) 6 (23) (31) 13 62
25
EPS 0.07 (0.26) (0.31) 0.13 0.55
20 Adj. EPS 0.41 (0.24) 0.08 0.52 0.94
15 DPS 0.00 0.00 0.00 0.00 0.00
10 Revenue growth (%) 30.4 9.9 50.5 34.4 30.2
May Jul Aug Oct Dec Mar May Adj. EBIT growth (%) 70.0 (74.3) n.m. n.m. 161.4
Adj. EPS growth (%) 15.6 n.m. n.m. 586.8 80.1
Absolute (green) / Relative to Sweden (purple).
Adj. EBIT margin (%) 2.6 0.6 (0.8) 1.2 2.4
ROE (%) 1.9 (4.7) (4.3) 1.9 7.4
ROCE (%) 6.5 0.9 (1.2) 3.0 8.7
Marketing communication
commissioned by: PER (x) 48.1 n.m. n.m. 45.9 25.5
Free cash flow yield (%) (7.7) (9.9) 5.3 8.5 2.6
Footway Group Dividend yield (%) 0.0 0.0 0.0 0.0 0.0
P/BV (x) 5.28 3.35 3.35 3.31 3.10
EV/Sales (x) 1.47 2.32 1.42 0.98 0.73
EV/Adj. EBITDA (x) 33.7 86.2 75.8 31.1 18.9
EV/Adj. EBIT (x) 57.3 384.4 (188.9) 83.0 31.0
Operating cash flow/EV (%) (6.6) (7.5) 5.0 8.7 3.1
Net debt/Adj. EBITDA (x) 5.18 18.38 7.81 0.96 0.16
Source for all data on this page: SEB (estimates) and Millistream/Thomson Reuters (prices)
research.sebgroup.com/corporate Important. All disclosure information can be found on pages 73 – 75 of this document
Corporate Research Footway Group 19 May 2021 2
Contents
Page
Investment conclusion ............................................................................................. 3
Coverage initiated: DCF value of SEK 39 ................................................................... 3
Capitalization and valuation........................................................................................... 8
Key risks and investment concerns ...........................................................................10
Equity valuation ......................................................................................................11
Midpoint DCF equity value of SEK 39 .......................................................................11
Peer group valuation ......................................................................................................11
Financial forecasts .................................................................................................16
Data driven, multi-store platform growth ...............................................................16
Gross margin recovery well underway ....................................................................20
Automated and crowdsourced cost base ................................................................21
Balance sheet and financial KPI forecasts ..............................................................23
Consumption outlook .............................................................................................26
Our baseline for discretionary spending ..................................................................26
Clothing market fundamentals .............................................................................28
Trading update amid Covid-19 pandemic ...............................................................30
Online market fundamentals ................................................................................33
Secular drivers top cyclical spending .......................................................................33
Amazon is here to stay ..................................................................................................37
TAM forecasts – Apparel ......................................................................................39
Browsing down the virtual high street .....................................................................42
Peer benchmarking and KPIs ................................................................................46
Company description .............................................................................................53
Leading footwear and sports destination ................................................................53
Business model and logistics .......................................................................................56
Seven store fronts in 24 country markets ...............................................................58
Sustainability ....................................................................................................................59
What could Footway become? ....................................................................................60
Shareholder structure....................................................................................................60
Management and board of directors.........................................................................61
Company timeline............................................................................................................63
The acquisition of Sportamore .............................................................................65
Sportamore in short ........................................................................................................65
Overview...................................................................................................................68
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Corporate Research Footway Group 19 May 2021 3
Investment conclusion
Coverage initiated: DCF value of SEK 39
We initiate coverage of online We initiate coverage of online specialist Footway Group with a midpoint DCF-
specialist Footway Group with a based equity value of SEK 39 (range of SEK 33-45). We expect strong sales
midpoint DCF-based equity value growth over our forecast period of 2021-2023 (CAGR of 32% p.a.). From this
of SEK 39 (range of SEK 33-45) sales growth and by leveraging its highly automated technology platform, we
expect EBITA margins to improve from about 2% in 2021, a year that will be
burdened by investments, to 4% in 2023. This corresponds to EBITA growing
from SEK 30m in 2021 to SEK 110m in 2023 (CAGR of 91%).
Footway Group is under-analysed In our opinion, Footway Group is under-analysed and thus misunderstood within
and misunderstood: we believe the investment community: we believe the equity is now being valued at about
the equity is now being valued at 1x 2022E EV/Sales. This equals a discount of almost 60% versus its Nordic
about 1x next year’s EV/Sales online retail peer group average. At our SEK 39 midpoint equity valuation,
Footway would trade at 1.6x EV/Sales, implying a more reasonable discount of
30% to reflect its small market cap and lesser liquidity.
Valuation summary based on DCF-based equity range
Mid-point DCF value (SEK) 39.00
Share price (SEK) 23.70
2022 EV/Sales (x) 1.00
2022E adj. EV/EBITA (x) 32.3
2021E DPS 0.00
Valuation potential Low High Mid-point
DCF valuation range (SEK) 33.00 45.00 39.00
Equity potential (%) 39 90 65
2022 EV/Sales at DCF valuation range (x) 1.37 1.84 1.61
2022 EV/EBITA at DCF valuation range (x) 44.1 59.4 51.7
2021E DPS yield (%) 0.0 0.0 0.0
Total return potential 39 90 65
Source: SEB
In summary, the following key points outline our investment case in Footway
Group:
● Large market opportunity: The European clothing and footwear market is
estimated at EUR 360bn, of which the Nordic market equals about EUR
14bn a year (4% of the total addressable market for Footway Group).
Having launched all seven online retail concepts in all 24 markets across
Europe, we argue Footway carries significant growth potential: in 2021 we
estimate its non-Nordic markets to contribute sales of below SEK 0.5bn.
● Accelerating online migration: The apparel and footwear segments are
popular online categories Europe-wide. In 2021, we estimate the online
share of total sales at 23%, implying over 30% growth compared with
2019. We believe online penetration will approach 28% in 2023, equal to
13.5% sales CAGR in the period 2019-2023
● Built on scale: We believe Footway Group’s highly automated technology
platform, launched in November 2021, distinguishes it from many of its
sector peers. In addition to integration with suppliers that manage their own
fulfilment of stock positions (about 90% of order approvals are
automated), this allows for AI-based algorithms to optimize marketing
spend. We expect Footway Group to launch additional online store fronts
on its platform (own and eventually external merchants), capitalizing on
one common backbone, one front-end system and, importantly, without
adding to costs
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Corporate Research Footway Group 19 May 2021 4
● Customer-centric at its core (LTV/CAC): Having automated its backbone
and front-end systems, Footway Group has always prioritized customer
contact and satisfaction. Its sites record premium scores in satisfaction
indices such as NPS (net promoter scores) and Google. We believe this
creates a solid margin opportunity from optimizing customer lifetime value
(CLV) versus customer acquisition costs (CAC). In the last 12 months, the
group attracted over 1m new customers and had 1.6m active customers at
the end of Q1 2021.
● Capital management and margin gains to bolster ROCE: Including stock-
in-trade from its recent acquisition of Sportamore – a leading Nordic online
retailer of mainly sports apparel – we believe focus at Footway Group will
now be on improving turnover rates (from inventory/trailing sales at 70.4%
in Q1 2021). Including the impact from increasing EBITA margins, bolstered
by SEK 100m in expected synergies from the integration of Sportamore, we
also expect ROCE to reach about 14% at the end of our forecast period in
2023. This would be on par with its online apparel and footwear retail peer
group median.
● M&A likely to deliver on its SEK 10bn vision: CEO Daniel Mühlbach has a
strong track record as entrepreneur. He founded and exited Lensway –
Europe’s largest contact lens company – and has orchestrated a string of
acquisitions at both Lensway and at Footway Group. The most recent
example was Footway’s acquisition of Sportamore in 2020. While our
financial forecasts do not include future acquisitions, we reckon there are
several potential M&A targets on the group’s agenda that could fit well with
its automated and scalable platform once the balance sheet allows. The
group’s vision is to reach SEK 10bn in total platform revenues.
Timeline: (asset) acquisitions, expansions and net sales 2011-2023E (SEKm)
3,500
13 new
markets
3,000
2,868
2,500
2,203
2,000
7 new
markets 1,639
1,500
Nordic-4
expansion
1,000 1,089
991
760
500
505
344
222 260
3 27 89
0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021E
2022E
2023E
Net sales (SEKm)
Source: SEB
Today Footway Group operates Today, Footway Group operates seven online retail concepts in 24 European
seven online retail concepts in 24 markets, with 168 country-specific stores. Most brands focus on sportswear
European markets, with 168 and footwear for any occasion or within a specific niche, such as streetwear and
country-specific stores basketball wear. In all it offers about 1,000 brands and 70,000 products. The
acquisition of Sportamore in 2020, adding about SEK 600m in run-rate sales
(post-restructuring) in mainly the Nordic markets (France was launched in mid-
2019), has increased Footway’s exposure to the sports segment substantially.
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Corporate Research Footway Group 19 May 2021 5
A significant growth opportunity based on accelerating online migration
Footway offers an exposure to From this base we see significant growth opportunities for Footway Group to
online segments that we estimate expand its sales over our forecast period to 2023. Footway offers an exposure
will continue to gain share of the to online segments that we estimate will continue to gain share of the total
total market spend market spend. Clothing and footwear and sports apparel are popular online
shopping categories for consumers across the Nordic region and in Europe as a
whole.
Bolstered by the marked increase in online consumption in 2020, Euromonitor
estimates cited by Zalando suggest the online share of clothing and footwear
sales is about 23% or EUR 83bn. This implies growth of 30%-35% y/y from
2019, from a penetration level of between 16-17% of total European apparel
spend.
European online clothing and footwear sales forecasts (EURm and %)
120,000 30.0
27.6
26.2
25.0
100,000 102,806 25.0
23.1
96,434
91,378
80,000 83,267 20.0
16.5
15.5
60,000 15.0
61,955
57,383
40,000 10.0
20,000 5.0
0 0.0
2018
2019
2020
2021E
2022E
2023E
European online fashion market (EURm) European fashion market - online penetration (%)
Source: SEB, Eurostat, Euromonitor, Zalando
We estimate the European market for apparel and footwear, including sports
apparel – equal to the total addressable market for Footway Group – calculated
at constant currency and excluding VAT, to be worth about EUR 360bn in 2020.
European clothing and footwear market forecasts (EURm)
400,000
350,000
57,383 61,955
83,267 91,378 96,434 102,806
300,000
250,000
200,000
150,000 312,830 313,528
277,197 274,133 271,635 269,679
100,000
50,000
0
2018
2019
2020
2021E
2022E
2023E
European offline fashion market (EURm) European online fashion market (EURm)
Source: SEB, Eurostat, Euromonitor, Zalando
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Corporate Research Footway Group 19 May 2021 6
Sweden: online penetration in selected segments (%) Nordic vs. European cloth. & footwear sales (EURm)
400,000
360,464
350,000
300,000
250,000
200,000
Nordic market size of about 4%
150,000 of total European fashion
market
100,000
50,000
14,308
0
Nordic-4 - clothing & footwear market, const. ccy (EURm) European fashion market, const. ccy, 2020E (EURm)
2020
Source: SEB, PostNord Source: SEB, Eurostat, Euromonitor, Zalando
Customer-centric brand to support LTV/CACs and margin development
In this marketplace Footway In this marketplace Footway Group has over time recorded high net promoter
Group has over time recorded high scores (“willingness to recommend”), typically at levels around 80. These levels
net promoter scores (“willingness compare well with other customer centric propositions in the online fashion
to recommend”), typically at sector, such as Boozt Group recording NPS scores of around 70.
levels around 80
Customer satisfaction - willingness to recommend
NPS (-100 to 100) 2015 2016 2017 2018 2019 2020
Boozt.com 65 65 67 71 69 70
Footway.com 81 80 79 80 79 n.a.
Source: SEB, Footway, Boozt group
We argue, over time, this suggests high customer lifetime values (LTV) and
therefore better return on CAC (customer acquisition costs/marketing spend).
In the last 12 months, the group attracted over 1m new customers and recorded
1.6m active customers at the end of Q1 2021.
No of new customers and no of active customers, LTM Estimated LTV-to-CAC* (24 months retention rates) (x)
('000)
3,500 7.0
2,989
3,000 6.0 5.8
5.7
5.2
5.0 4.9
2,500 5.0 4.8
2,305 4.6
4.4 4.5
1,967 4.1
2,000 4.0
1,706 1,659
1,592
1,500 3.0
1,262
1,050
1,000 2.0
500 1.0
0
0.0
Q2/21E
Q3/21E
Q4/21E
Q1/22E
Q2/22E
Q3/22E
Q4/22E
Q2/18
Q3/18
Q4/18
Q1/19
Q2/19
Q3/19
Q4/19
Q1/20
Q2/20
Q3/20
Q4/20
Q1/21
2023E
2017
2018
2019
2020
2021E
2022E
2023E
No. of active customers, LTM ('000) No of new customers, LTM ('000) LTV incl. GM (24M)/adj. CAC (x) LTV incl. GM (24M)/CAC (x)
Source: SEB Source: SEB. *Adj. CAC = excl. EO marketing estimated at SEK 52m in Q4/20-Q1/21
We note that Footway has a Looking at traffic data in more detail, we note that Footway has a relatively high
relatively high share of organic share of organic search traffic to its two main sites being footway.com and
search traffic to its two main sites sportamore.com (weighted average of 42% in March). We reckon these
being footway.com and numbers remain muted by its change in platform in November in last year,
sportamore.com suggesting that the SEO-based site traffic (i.e. not paid for ad words) could
improve further. We note that Zalando’s strong market position in the Nordic
countries results in corresponding organic search traffic of around 68%. This
represents a 25pp difference compared to the weighted average for Footway
and Sportamore.
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Corporate Research Footway Group 19 May 2021 7
Organic share of search traffic (%) Footway vs Sportamore: organic share of search (%)
50.0
47.0
Amazon.com Well-established => 88.8
45.0
42.0
Boohoo.com 86.4
40.0
36.1
Zalando Nordic total (weighted) 67.8
35.0
CDON group total (weighted) 64.7 30.0
Footway & Sportamore total (weighted) 42.0 25.0
Nelly.com 40.6 20.0
15.0
Boozt group total (weighted) 40.2
10.0
Na-kd.com 40.1
5.0
Amazon.se 26.5
Corporate Research Footway Group 19 May 2021 8
Capital management forecasts (%) EBITA and EBIT margin forecasts (%)
100.0 7.0
5.9
6.0
5.0
74.8 5.0
75.0
3.8
62.5 4.0
59.7 59.8 3.3
57.0 3.2 3.2 3.1
56.0 2.9
3.0 2.6
48.6 2.3 2.4
50.0
2.0 1.8
2.0 1.8
36.0 1.2
34.2
35.0 1.0 0.6
25.0
0.0
(0.8)
(1.0)
(1.6)
0.0 (2.0)
2015
2016
2017
2018
2019
2020
2015
2016
2017
2018
2019
2020
2021E
2022E
2023E
2021E
2022E
2023E
Inventory/sales (%) Inventory/sales ambition (%) Adj. EBITA margin (%) Adj. EBIT margin (%)
Source: SEB Source: SEB
ROCE forecasts (%) Online peer groups median ROCE forecasts (%)
16.0 25.0
14.2
14.0
20.3 ROCE forecasts (%)
20.0 19.1
11.7 18.5
12.0
9.6 15.6
10.0
15.0 14.5 14.2
13.7
8.1
7.6 7.8 8.3 12.5
8.0
11.5 11.2
7.2
10.0
6.0
7.8
4.0 3.5
3.0
2.6 5.0
2.0 3.0
0.0 0.0
2015
2016
2017
2018
2019
2020
2021E
2022E
2023E
Omni Retail & Sports fashion, Online Retail & Marketplace, Online Apparel & Footwear, med Footway Group
med med
Adj. ROCE ROCE, 6Y avg (2015-2020) ROCE, 3Y f'cast avg (2021-2023E) 2021E 2022E 2023E
Source: SEB Source: SEB, Factset
Capitalization and valuation
Capitalization forecasts and valuation
(SEKm) 2014 2015 2016 2017 2018 2019 2020 2021E 2022E 2023E
Ordinary no of shares, f. dil., avg, adj. (m) 51.495 56.253 61.011 62.671 63.073 63.751 79.466 86.891 87.230 87.230
Share price (SEK) 23.70 23.70 23.70 23.70 23.70 23.70 23.70 23.70 23.70 23.70
Market cap 1,220 1,333 1,446 1,485 1,495 1,511 1,883 2,059 2,067 2,067
Net debt/(cash) n.a. (14) (1) (16) 76 169 371 239 67 17
EV 1,220 1,320 1,445 1,469 1,571 1,680 2,254 2,299 2,134 2,085
Valuation (x)
EV/Sales (x) 5.50 5.08 4.20 2.91 2.07 1.70 2.07 1.40 0.97 0.73
EV/EBITA (x) (30.4) 217.4 70.9 58.5 70.8 52.3 114.6 76.2 31.2 18.9
Ordinary DPS (SEK) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Ordinary dividend yield (%) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Preference shares
Pref. no of shares (m) 0.000 0.550 0.550 0.550 0.550 0.550 0.550 0.550 0.550 0.550
Pref. share price (SEK) 125.50 125.50 125.50 125.50 125.50 125.50 125.50 125.50 125.50 125.50
Market cap, pref. shares 0 69 69 69 69 69 69 69 69 69
DPS, pref. (SEK) 0.00 1.85 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00
Pref. dividend yield (%) 0.0 1.5 6.4 6.4 6.4 6.4 6.4 6.4 6.4 6.4
Source: SEB
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Footway Group today has a market capitalization of around SEK 2.1bn. The
group has outstanding preference shares (yielding 6.4% p.a. based on
preferred dividend payouts of SEK 8 per share) with a market capitalization of
SEK 69m. We do not forecast any ordinary dividend payments over our
projection period of 2021-2023. Following asset acquisitions in 2020, the most
important of which was Sportamore, the group ended Q1 2021 with net debt of
SEK 384m. Markets have been difficult because of the pandemic (demand in
several shoe categories, such as workplace and occasional wear, has slumped)
and the group invested in extra marketing expenditure in Q4 2020 and in Q1
2021, burdening short-term margins and profitability.
The group targets about 35% Net debt-to-EBITDA was 37x in Q1 2021, which we expect to drop to 19x in Q2,
inventory/sales in the “medium- 18x in Q3 and 8x at the year-end. This is based on our forecasts for net debt of
term” SEK 240m at the end of Q4 2021 and reflects the company releasing working
capital (stock-in-trade) and paying down debt. Here, the group targets about
35% inventory/sales in the “medium term”. Based on lowered inventory
positions, as well as strong sales growth, our forecasts imply 49% inventory-to-
sales at the end of 2021 and 36% at the end of 2022.
Inventory-to-sales forecasts (%)
100.0
74.8
75.0
62.5
59.7 59.8
57.0 56.0
48.6
50.0
36.0
34.2
35.0
25.0
0.0
2015
2016
2017
2018
2019
2020
2021E
2022E
2023E
Inventory/sales (%) Inventory/sales ambition (%)
Source: SEB
Net debt-to-EBITDA forecasts (x)
20.00
18.38
15.00
10.00
7.81
5.18
5.00
3.35
0.96
(0.04) 0.16
(0.31) (0.64)
0.00
(2.07)
(5.00)
2014
2015
2016
2017
2018
2019
2020
2021E
2022E
2023E
Net debt/adj. EBITDA (x)
Source: SEB
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Key risks and investment concerns
We have identified the following material risks and investment concerns in
Footway Group:
● Cyclical underlying demand: Any discretionary spending, including in the
apparel and footwear segment of the retail market, builds from private
consumption growth and as such is cyclical. As analysed in more detail in
this research note, we conclude a strong correlation between employment
concerns (a consumer confidence indicator) and retail sales. When
consumers become more concerned about maintaining employment (i.e.
not the unemployment rate as such), this historically has burdened
discretionary spending and vice versa. The secular trend towards health,
well-being and exercising should support the sports apparel segment
across the cycle, we believe. In this perspective, the addition of Sportamore
is a mitigating factor for Footway Group as it dilutes the dependence on
sales of primarily footwear
● Unseasonable weather conditions: Seasonable weather conditions are
perhaps the most important driver of short-term consumer buying patterns.
This is well-established across the retail sector. The footwear segment is
arguably more dependent on seasonal weather than apparel in general,
especially in big-ticket winter seasons.
● High indebtedness and WC position: Coming out of difficult trading amid
the Covid-19-pandemic, as well as having invested extra in marketing costs
to populate new markets with local data, Footway Group’s net debt-to-
EBITDA is currently high at 37x (end-Q1 2021). While the company is not
in breach of covenants (which are based on debt-to-inventory) this also
risks maintaining a higher equity risk premium until levels normalise (we
estimate towards the end of this year). Lowering its stock-in-trade position
is key to releasing working capital and to paying down debt. We believe
these issues, including focusing on lifting EBITA margins are at the top of the
company’s agenda.
● Limited track record of profitability with new platform: While we reckon
its highly automated e-commerce platform could be a competitive
advantage that will give Footway Group economies of scale in future
expansions (common backbone and front-end systems for all stores on the
platform), the company has yet to build a track record showing organic
growth and at increasing margins and profitability. The group has
experienced some automation issues because not all product categories
can be fully automated and still require manual sales/handling – this is why
some Sportamore lines have been discontinued. However, in the longer
term we believe the globalisation and automation of Footway’s processes
– including sourcing/supplies, product categorization, pricing, reporting,
return handling, warehousing and marketing – will all compound to produce
higher margins and returns on investment compared to peers.
● New distribution investment phase: Footway Group has decided to
double its capacity in its fully automated Eskilstuna distribution centre (DC)
to 48,000 square metres. This will mean higher costs this year and next
(when two DCs will run in parallel) and could impact sales performance in
the transition period. The chosen Auto Store system is well-established in
the industry (sector peer Boozt has successfully invested in the same
system) and we believe longer term that this could significantly reduce
handling costs per order and bolster EBITA margins.
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Equity valuation
Midpoint DCF equity value of SEK 39
To value Footway Group we use a DCF approach. We use an equity risk premium
of 4% in our weighted average cost of capital (WACC of 6.1%). Reflecting the
indebtedness, our WACC assumptions have a fairly large impact on the equity
value in Footway Group, as outlined in the sensitivity tables below.
We use a steady-state EBIT margin of 4%. Based on our margin analyses
elsewhere in this research, this could be conservative. Here too, we provide
sensitivities to changes in margin assumptions and the resulting impact on our
equity valuation, which is also material, in the tables below.
Based on a WACC of 6.1% and a In all, based on a WACC of 6.1% and a steady-state EBIT margin assumption of
steady-state EBIT margin 4%, we arrive at our midpoint equity valuation of SEK 39 per share in Footway
assumption of 4%, we arrive at Group.
our midpoint equity valuation of
SEK 39 per share Midpoint DCF equity valuation – summary
DCF valuation (SEKm) Weighted average cost of capital (%)
NPV of FCF in explicit forecast period 887 Risk free interest rate 2.5
NPV of continuing value 2,824 Risk premium 4.0
Value of operation 3,711 Cost of equity 6.5
Net debt, incl. Pref shares 309 After tax cost of debt 2.0
Share issue/buy-back in forecast period -
Value of associated companies - WACC 6.1
Value of minority shareholders' equity -
Value of marketable assets - Assumptions
DCF value of equity 3,402 Number of forecast years 10
DCF value per share (SEK) 39.00 EBIT margin - steady state (%) 4.0
Current share price (SEK) 24.00 EBIT multiple - steady state (x) 17.0
DCF performance potential (%) 63 Continuing value (% of NPV) 76.1
Source: SEB
DCF range: sensitivities to CoE and ECW (%) DCF range: sensitivities to margins and growth (%)
Cost of equity (%) Absolute change in EBITDA margin - all years
5.5 6.0 6.5 7.0 7.5 -2% -1% 0 +1% +2%
72 65.4 58.9 53.4 48.7 44.6 -2% 17.4 26.3 35.2 44.0 52.9
Equity capital 82 55.8 50.1 45.3 41.2 37.6 Abs. change in -1% 18.3 27.7 37.0 46.4 55.8
weight (%) 92 48.4 43.3 39.0 35.3 32.2 sales growth - 0 19.2 29.1 39.0 48.9 58.8
100 43.3 38.7 34.7 31.4 28.5 all years +1% 20.2 30.6 41.1 51.5 62.0
100 43.3 38.7 34.7 31.4 28.5 +2% 21.2 32.2 43.3 54.3 65.3
Source: SEB Source: SEB
Peer group valuation
There are a number of important As outlined in this research, we believe there are a number of important factors
factors that separates Footway that separate Footway Group from its online retail peers, notably and including
Group from its online retail peers, its highly automated technological platform allowing for one common backbone
notably and including its highly (the new distribution centre will be fully automated, based on a solution from
automated technological platform industry benchmark Auto Store) and one common front-end system. Over time
this should provide a margin premium, as this structure allows for both organic
growth and other expansions; and without necessarily adding much to costs.
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On the other hand – as outlined in detail in our section “Peer benchmarking and
KPIs” – there are significant differences between Footway Group and other
Nordic and international online retailers in everything from average order values
to return rates, which affects the balance between sales growth and margins.
Some online retailers, like Desenio (the online poster and prints company) and
RugVista (the online carpet retailer), generate EBIT margins of 20-25%: other
companies have margins in low single digits and some cases even have negative
margins. Also, Footway Group maintains a significantly higher stock-in-trade level
compared to its peers, which holds back its relative ROCE.
We estimate sales CAGR of 32% in Sales growth expectations also differ substantially. We estimate sales CAGR of
2021-2023 for Footway Group, 32% in 2021-2023 for Footway Group, which well above the estimated median
which well above the estimated sales CAGR of 10% for the peer group.
median sales CAGR of 10% for the
peer group Peer group sales CAGR 2021-2023 estimates (%)
Footway Group 32.3
Farfetch Limited Class A 29.8
Desenio Group AB 29.5
boohoo group Plc 23.6
Lyko Group AB Class A 23.4
BHG Group 22.3
Zalando SE 19.0
Boozt 18.4
Stitch Fix, Inc. Class A 17.1
Ocado Group PLC 16.7
Pierce Group AB 16.5
ASOS plc 16.1
Rugvista Group AB 16.1
zooplus AG 14.9
PUMA SE 12.5
JD Sports Fashion Plc 10.1
Peer group, med 9.6
adidas AG 9.1
NIKE, Inc. Class B 9.0
ZOZO, Inc. 8.8
Overstock.com, Inc. 8.0
Verkkokauppa.com Oyj 7.6
Hennes & Mauritz 7.2
CDON 7.2
Delticom AG 6.1
Nelly Group 5.9
SRP Groupe SA 4.5
Asics Corporation 4.3
Under Armour, Inc. Class A 4.3
XXL ASA 3.1
Genesco Inc. 2.9
Foot Locker, Inc. 2.2
0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0
Source: SEB, Factset
EBIT margin forecast 2022 (%)
ZOZO, Inc. 30.8
Desenio Group AB 23.7
Rugvista Group AB 18.9
NIKE, Inc. Class B 16.2
adidas AG 11.3
Hennes & Mauritz 11.2
CDON 9.7
PUMA SE 9.2
JD Sports Fashion Plc 8.8
Foot Locker, Inc. 8.5
boohoo group Plc 7.7
BHG Group 7.2
Pierce Group AB 7.0
Boozt 6.6
Under Armour, Inc. Class A 6.1
Peer group, med 5.7
Lyko Group AB Class A 5.7
Asics Corporation 4.7
ASOS plc 4.5
Genesco Inc. 4.5
Overstock.com, Inc. 4.5
SRP Groupe SA 4.3
Verkkokauppa.com Oyj 4.1
Zalando SE 3.9
AO World Plc 3.0
XXL ASA 2.8
Delticom AG 2.7
Nelly Group 2.5
zooplus AG 1.7
Footway Group 1.2
Ocado Group PLC (2.4)
Stitch Fix, Inc. Class A (3.0)
Farfetch Limited Class A (10.9)
(15.0) (10.0) (5.0) 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0
EBIT margins (%) 2022E
Source: SEB, Factset
We divide our peer group into three sub-groups: omni retailers and brand
owners focusing on footwear and sports apparel (including companies like
FootLocker, Adidas and Genesco that owns and retails Johnston & Murphy, for
example); online retailers (including AO World, BHG and Overstock); and online
apparel and footwear retailers (including ASOS, Boozt and Zalando).
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Peer group valuation and share price performance
CCY Share Mkt cap EV/Sales (x) EV/EBIT* (x) Abs. performance (%)
Online Retail & Sports Fashion price price (EURm) 2021E 2022E 2023E 2021E 2022E 2023E -1M -3M -12M
Omni Retail & Sports fashion
adidas AG EUR 288.55 57,830 2.71 2.47 2.28 27.7 21.8 18.4 3.9 (1.1) 47.8
Asics Corporation JPY 2,178.00 3,114 1.19 1.13 1.09 38.0 24.0 19.7 20.7 9.7 120.7
Foot Locker, Inc. USD 64.60 5,499 1.03 1.00 0.99 12.4 11.8 11.3 10.2 23.9 163.1
JD Sports Fashion Plc GBP 8.93 10,696 1.39 1.26 1.15 17.3 14.4 12.9 (4.1) 11.0 71.0
Genesco Inc. USD 55.72 687 0.62 0.59 0.58 15.4 13.1 11.8 11.4 27.9 259.9
Hennes & Mauritz SEK 211.90 34,526 1.86 1.63 1.51 23.3 14.5 12.5 4.1 17.8 77.2
NIKE, Inc. Class B USD 135.93 142,832 4.45 4.08 3.74 29.0 25.1 22.2 2.8 (4.4) 57.1
PUMA SE EUR 90.20 13,604 2.27 2.00 1.79 29.6 21.8 17.9 (1.2) 5.5 57.8
Under Armour, Inc. Class A USD 22.78 7,206 2.09 1.99 1.92 42.7 32.7 26.7 2.8 1.8 195.5
XXL ASA NOK 21.44 536 0.80 0.76 0.73 20.8 27.7 25.3 12.8 9.4 112.3
Omni Retail & Sports fashion, avg 1.84 1.69 1.58 25.6 20.7 17.9 6.3 10.2 116.2
Omni Retail & Sports fashion, med 1.62 1.45 1.33 25.5 21.8 18.2 4.0 9.6 94.7
Online Retail & Marketplace
AO World Plc GBP 2.54 1,414 0.68 0.60 n.a. 23.5 20.1 n.a. (20.0) (15.8) 179.1
BHG Group SEK 146.90 1,749 1.63 1.36 1.10 24.1 18.8 15.8 (13.9) 2.7 106.3
CDON SEK 480.60 283 4.07 3.96 3.31 n.a. 40.6 22.5 (21.3) (35.1) n.a.
Delticom AG EUR 7.56 94 0.32 0.30 0.28 17.2 11.1 9.5 (3.6) (4.3) 173.9
Desenio Group AB SEK 94.70 1,348 7.89 5.87 4.43 36.0 24.8 18.4 0.4 n.a. n.a.
Lyko Group AB Class A SEK 311.50 471 2.50 1.99 1.60 51.3 35.0 26.0 (2.4) 1.8 74.5
Ocado Group PLC GBP 19.87 17,291 5.08 4.36 3.73 n.a. n.a. n.a. (6.3) (24.2) 1.6
Overstock.com, Inc. USD 71.14 2,522 0.92 0.83 0.79 23.1 18.6 16.6 (8.1) (33.4) 282.1
Pierce Group AB SEK 80.40 315 1.87 1.56 1.30 29.2 22.4 17.6 1.3 n.a. n.a.
Rugvista Group AB SEK 168.00 345 4.87 4.15 3.45 24.1 22.0 18.8 12.9 n.a. n.a.
Verkkokauppa.com Oyj EUR 8.30 374 0.61 0.57 0.53 15.6 13.9 12.2 (11.7) (2.1) 113.9
zooplus AG EUR 223.80 1,600 0.75 0.65 0.57 51.5 37.2 27.0 (13.4) (2.7) 61.9
Online Retail & Marketplace, avg 2.60 2.18 1.92 29.6 24.1 18.4 (7.2) (12.6) 124.2
Online Retail & Marketplace, med 1.75 1.46 1.30 24.1 22.0 18.0 (7.2) (4.3) 110.1
Online Apparel & Footwear
ASOS plc GBP 49.60 5,750 1.25 1.06 0.93 25.5 23.3 19.4 (8.6) (6.4) 86.7
boohoo group Plc GBP 3.19 4,675 1.66 1.34 1.08 22.1 17.3 14.8 (11.3) (12.9) (9.3)
Boozt SEK 184.20 1,159 1.97 1.60 1.37 30.3 24.4 19.2 (15.6) (5.4) 203.0
Farfetch Limited Class A USD 41.90 10,771 6.91 5.35 4.10 n.a. n.a. n.a. (20.3) (39.7) 163.7
Nelly Group SEK 33.95 60 0.33 0.31 0.29 28.5 12.3 8.9 (7.7) (3.0) 129.8
SRP Groupe SA EUR 3.56 419 0.47 0.45 0.43 11.7 10.5 9.4 11.4 (2.7) 597.1
Stitch Fix, Inc. Class A USD 43.06 2,419 2.40 2.03 1.75 n.a. n.a. n.a. (8.1) (49.4) 121.5
Zalando SE EUR 84.08 21,940 2.08 1.74 1.47 52.8 44.2 33.7 (3.6) (15.8) 59.4
ZOZO, Inc. JPY 3,550.00 8,332 6.50 6.01 5.48 21.6 19.5 17.2 0.3 2.5 79.3
Online Apparel & Footwear, avg 2.62 2.21 1.88 27.5 21.6 17.5 (7.0) (14.8) 159.0
Online Apparel & Footwear, med 1.97 1.60 1.37 25.5 19.5 17.2 (8.1) (6.4) 121.5
Peer group, avg 2.36 2.03 1.79 27.6 22.2 18.0 (2.8) (5.2) 132.8
Peer group, med 1.86 1.56 1.34 24.1 21.8 17.9 (3.6) (2.7) 112.3
Footway Group* SEK 24.00 206 1.42 0.98 0.74 n.a. 82.3 30.7 (13.0) (20.0) 89.0
Discount/(Premium) to Online peers, avg (%/pp) 39.7 51.8 59.0 n.a. (269.8) (71.1) 10.3 14.8 43.9
Discount/(Premium) to Online peers, med (%/pp) 23.4 37.0 45.0 n.a. (278.0) (71.9) 9.5 17.3 23.3
Source: SEB, Factset. *Footway Group adj. for GW amort (EV/EBITA)
The share prices of our peer group The share prices of our peer group have been boosted over the past year
have been boosted over the past because of the way the pandemic has encouraged consumers to move online.
year because of the way the The median share price performance is up 112%, whereas median 2021 EPS
pandemic has encouraged estimates over the same period have been upgraded by 16%, suggesting a
consumers to move online marked multiple expansion in the sector. (Within that, multiples for some
companies have contracted, for example ASOS).
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Peer group share price performance, -1Y (%)
Overstock.com, Inc. 282.1
Genesco Inc. 259.9
Boozt 203.0
Under Armour, Inc. Class A 195.5
AO World Plc 179.1
Delticom AG 173.9
Farfetch Limited Class A 163.7
Foot Locker, Inc. 163.1
Nelly Group 129.8
Stitch Fix, Inc. Class A 121.5
Asics Corporation 120.7
Verkkokauppa.com Oyj 113.9
Peer group, med 112.3
XXL ASA 112.3
BHG Group 106.3
Footway Group 89.0
ASOS plc 86.7
ZOZO, Inc. 79.3
Hennes & Mauritz 77.2
Lyko Group AB Class A 74.5
JD Sports Fashion Plc 71.0
zooplus AG 61.9
Zalando SE 59.4
PUMA SE 57.8
NIKE, Inc. Class B 57.1
adidas AG 47.8
Ocado Group PLC 1.6
boohoo group Plc (9.3)
(50.0) 0.0 50.0 100.0 150.0 200.0 250.0 300.0
Abs. performance (%) -12M
Source: SEB, Factset
Peer group 2021 EPS revisions, -1Y (%) Peer group capital management forecasts (%)
60.0
ASOS plc 207.1
Under Armour, Inc. Class A 156.5 Inventory/sales forecasts (%)
AO World Plc 146.5
50.0 48.6
Zalando SE 70.4
Verkkokauppa.com Oyj 69.9
BHG Group 59.7 40.0
36.0
boohoo group Plc 35.7 34.2
Peer group, med 16.1
30.0
ZOZO, Inc. 16.1
JD Sports Fashion Plc 14.8
Foot Locker, Inc. 7.0
20.0
17.5
NIKE, Inc. Class B 3.5 16.6 16.3
PUMA SE (3.3) 12.1
10.8 11.2
9.8
Lyko Group AB Class A (12.8) 10.0 8.3 8.2
adidas AG (15.7)
Genesco Inc. (25.0)
0.0
Asics Corporation (50.8) Omni Retail & Sports fashion, med Online Retail & Marketplace, med Online Apparel & Footwear, med Footway Group
(100.0) (50.0) 0.0 50.0 100.0 150.0 200.0 250.0 2021E 2022E 2023E
Source: SEB, Factset
Because Footway Group’s EBIT is burdened by amortization of goodwill (so far,
the company has not consolidated acquisitions, preferring to acquire the assets
and then liquidate the target company), we believe investors may increasingly
look at EV/EBITA when margin levels return to more normal levels. For now, we
argue EV/Sales could be a preferred valuation metric in a relative valuation of
Footway Group. Given its small capitalization, we suggest valuing Footway
Group using a peer group of local online retail exposures as a proxy for
alternative investments.
Footway Group is valued at about Based on our estimates, Footway Group is valued at about 1x 2022 EV/Sales.
1x 2022E EV/Sales, a discount of This is a discount of nearly 60% to its Nordic online retail peer group average
nearly 60% to its Nordic online (and about a 40% discount to the median valuation).
retail peers
Our midpoint DCF-based equity value in Footway Group of SEK 39 per share
translates into an EV/Sales multiple of 1.6x 2022E, a discount of 30% to its local
online retail peers. We believe this discount is justified by its small market cap
and lesser liquidity.
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Nordic online retail peer group valuation
EV/Sales (x) EV/EBIT* (x) 3Y sales EBIT marg Abs. performance (%)
RIC 2021E 2022E 2021E 2022E CAGR (%) 2022E (%) 1M 3M 12M
Nordic online retail
BHG Group BHGF.ST 1.63 1.36 24.1 18.8 22.3 7.2 (13.9) 2.7 106.3
Boozt BOOZT.ST 1.97 1.60 30.3 24.4 18.4 6.6 (15.6) (5.4) 203.0
CDON CDON.ST 4.07 3.96 n.a. 40.6 7.2 9.7 (21.3) (35.1) n.a.
Desenio Group AB DSNO.ST 7.89 5.87 36.0 24.8 29.5 23.7 0.4 n.a. n.a.
Lyko Group AB Class A LYKOa.ST 2.50 1.99 51.3 35.0 23.4 5.7 (2.4) 1.8 74.5
Nelly Group NELLY.ST 0.33 0.31 28.5 12.3 5.9 2.5 (7.7) (3.0) 129.8
Pierce Group AB PIERCE.ST 1.87 1.56 29.2 22.4 16.5 7.0 1.3 n.a. n.a.
Rugvista Group AB RUG.ST 4.87 4.15 24.1 22.0 16.1 18.9 12.9 n.a. n.a.
Verkkokauppa.com Oyj VERK.HE 0.61 0.57 15.6 13.9 7.6 4.1 (11.7) (2.1) 113.9
Peer group, avg 2.86 2.37 29.9 23.8 16.3 9.5 (6.4) (6.8) 125.5
Peer group, med 1.97 1.60 28.8 22.4 16.5 7.0 (7.7) (2.6) 113.9
Footway Group* FOOTb.ST 1.42 0.98 76.2 31.2 32.3 1.2 (13.0) (20.0) 89.0
Discount/(premium) to average (%) 50.2 58.7 (155.0) (31.0) (48.6) (10.7) 6.6 13.2 36.5
Discount/(premium) to median (%) 27.8 38.9 (164.5) (39.3) (48.8) (8.1) 5.3 17.4 24.9
Source: SEB, Factset. *Footway Group adj. for GW amort (EV/EBITA)
Nordic online retail peer group: market capitalization (EURm)
BHG Group 1,749
Desenio Group AB 1,348
Boozt 1,159
XXL ASA 536
Lyko Group AB Class A 471
Verkkokauppa.com Oyj 374
Rugvista Group AB 345
Pierce Group AB 315
CDON 283
Footway Group 206
Nelly Group 60
0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000
Mkt cap (EURm)
Source: SEB, Factset
All peer groups versus Footway Group: ROCE forecasts 2021-2023 (%)
25.0
ROCE forecasts (%)
20.3
20.0
19.1
18.5
15.6
15.0 14.5
14.2
13.7
12.5
11.5
11.2
10.0
7.8
5.0
3.0
0.0
Omni Retail & Sports fashion, med Online Retail & Marketplace, med Online Apparel & Footwear, med Footway Group
2021E 2022E 2023E
Source: SEB, Factset
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Financial forecasts
Data driven, multi-store platform growth
Footway has developed a highly Footway has developed a highly automated data-driven platform, allowing the
automated data-driven platform, group to leverage from adding both new brands and product categories, as well
allowing the group to leverage as new country markets and at low incremental cost.
from adding both new brands and
product categories, as well as new We base our financial forecasts on the seven brands and 24 country markets in
country markets and at low which Footway operates today. In the context of the large but fragmented
incremental cost European market for clothing and apparel (see our market analysis section),
Footway Group is very small, and we believe it can outgrow both the total
market and the fast-growing online segment for several years ahead.
Our forecasts imply a sales CAGR Including our assumptions for about SEK 600m in added sales from the asset
of about 32% p.a. in 2021-2023 acquisition of Sportamore (the company was not consolidated) this year, we
forecast 2021 sales to reach SEK 1.64bn (+51% y/y) and SEK 2.87bn by the
end of 2023 (+30% y/y). This implies a sales CAGR of about 32% p.a. in 2021-
2023.
12M trailing sales growth forecasts, y/y (%)
80.0
70.0
65.0
60.0
54.3
50.4 50.5
50.0 47.9
45.7
40.0 37.8 38.6 38.1
35.0 34.4
30.4 30.3 30.2
30.0
20.0
15.2
10.2 9.9
10.0
6.1
0.0
Q4/18
Q1/19
Q2/19
Q3/19
Q4/19
Q1/20
Q2/20
Q3/20
Q4/20
Q1/21
Q2/21E
Q3/21E
Q4/21E
Q1/22E
2023E
Q2/22E
Q3/22E
Q4/22E
12M trailing sales growth, y/y (%)
Source: SEB
Our forecasts imply European Reflecting our assumptions for higher growth in its newly established European
sales growing its share of revenue markets (2021-23 CAGR of 60%), compared to its Nordic home markets
from around 25% at the end of (CAGR of 20%), our forecasts imply European sales growing their share of
last year to 39% of total revenue revenue from around 25% of total revenue at the end of last year to 39% in
in 2023 2023.
As Footway seeks to expand in new European markets, we assume marketing
costs will represent an increasing proportion of sales over our forecast period.
Populating its marketing algorithm in new markets (collecting data) led to
extraordinarily high marketing-related spending in Q4 2020 (SEK 22m) and in
Q1 2021 (SEK 30m). As these investments ease in the medium term, we reckon
the company’s data-driven approach to marketing could mitigate the higher
share of customer acquisition costs (CAC) relating to European market sales.
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Geographical sales contribution forecasts
100% 1.9
11.5
90% 21.6
24.5 26.7
34.6 33.1 34.0
80% 35.7 39.0
44.8
70% 36.2
60% 34.9 31.3 28.7
25.5
50% 23.6
40%
65.4 66.9
30% 62.4
55.2
52.3
43.5 44.2 44.7
20% 40.5
37.4
10%
0%
2014 2015 2016 2017 2018 2019 2020 2021E 2022E 2023E
Sweden Other Nordic Europe
Source: SEB
Marketing cost growth versus sales growth forecasts, y/y (%)
80.0
Q4/20: SEK 22m Q1/21: SEK 30m
EO marketing EO marketing
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
Q4/18
Q1/19
Q2/19
Q3/19
Q4/19
Q1/20
Q2/20
Q3/20
Q4/20
Q1/21
Q2/21E
2023E
Q3/21E
Q4/21E
Q1/22E
Q2/22E
Q3/22E
Q4/22E
LTM Marketing cost (est.) growth, y/y (%) LTM sales growth, y/y (%)
Source: SEB
Our sales growth forecast of 51% Our sales growth forecast of 51% in 2021 to SEK 1.64bn includes expected
in 2021 to SEK 1.64bn includes sales generated from the asset acquisition of Sportamore. According to
expected sales generated from Footway Group, Sportamore would have generated pro forma sales of
the asset acquisition of SEK 899m in the 10 months to end-October 2020 (if it had acquired
Sportamore Sportamore on 1 January 2020). In full-year 2019, Sportamore generated
reported sales of around SEK 1bn (similar to Footway Group at SEK 991m as
reported in the same year).
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Footway Group and Sportamore sales bridge 2019-2021E
2,500
2,000
50
101 151
151 208
1,500 1,007
1,000
1,639
500 991
0
FOOT Group sales SPOR sales 2019 SPOR discont. (low SPOR discont. (non- SPOR Man RunForest FOOT & SPOR lost FOOT Group sales
2019 margins) data driven (transferred to sales (marketing 2021E
categories) RunForest) algorithm)
Source: SEB
Footway has taken an active Importantly, Footway has taken an active decision to discontinue Sportamore’s
decision to discontinue sales of, for example, bulky hard goods categories (such as table tennis) and
Sportamore’s sales of, for product categories with low, or negative margin contributions. We estimate this
example, bulky hard good decision will reduce sales in Sportamore by about SEK 50m (5% of sales) per
categories (such as table tennis) year.
and product categories with low,
or negative margin contributions Its new Sportamore concept will also focus on soft goods and apparel and target
the women’s segment of the market. Its men’s segment category sales (we
estimate about SEK 150m, or 15% of annual sales) has been removed from
Sportamore.com and transferred to RunForest.com – another of its own brand
stores.
Footway has recognized that stipulated product categories cannot or are not
optimal to be handled in a fully data driven and automated way, like on
Footways’ platform, but require significant manual merchandising and sales
processes. The decision to only hire about 50 FTEs from Sportamore (mainly in
distribution), coincides with the discontinuation of an estimated SEK 100m (or
10%) in annual sales in Sportamore.
Summing up, this means that Summing up, this means that compared to the SEK 1bn in pre-acquisition annual
compared to the SEK 1bn in pre- sales from Sportamore, we expect Sportamore to contribute around SEK 600m
acquisition annual sales from in sales in 2021. Reflecting issues with populating its new platform (which was
Sportamore, we expect this launched in November 2020) with localized and customer-driven data across
company to contribute with all new markets, the company estimates that it has recognized extraordinary
around SEK 600m in sales in this customer acquisition costs (data collection) of SEK 22m in Q4 2020 and an
year additional SEK 30m in Q1 2021. We estimate the negative sales impact from its
non-functional marketing algorithm in Q4 and in Q1 to about SEK 200m.
KPI forecasts reflect strong customer growth, lower conversion rates
We reckon increased marketing Like in any online retailer, sales growth builds from a common set of volume and
spend will also drive site traffic, price/mix KPIs, such as site visits, conversion rates (to orders) and active
while order conversion rates will customers (having placed at least one order over the past 12 months), as well
improve over time as the average order value (AOV). Reflecting Footway Group entering several
new markets, we reckon increased marketing spend will also drive site traffic,
while order conversion rates will improve over time along with increasing
customer knowledge and satisfaction. The AOV levels reflect a desired price
position in each market (relative to competitors in its segment), as well as
consumer behaviour: the number of items placed in each basket and the
tendency to return, etc.
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Active customer growth forecasts, LTM, y/y (%) Order conversion rate forecasts, LTM (%)
70.0 4.00
60.0 58.7
3.48
3.50 3.40 3.42
3.33 3.33
3.25 3.28
50.0
46.0 3.17
3.06
40.9 2.97
3.00
40.0
35.8 35.1
2.67
30.0 30.0 29.7
30.0 28.6 28.0
2.50 2.44 2.44
25.0 2.39
2.34 2.35
21.5 2.29 2.30 2.28
2.22
20.0 18.3
14.8
12.7 2.00
9.0
10.0
0.0 1.50
Q2/19
Q3/19
Q4/19
Q1/20
Q2/20
Q3/20
Q4/20
Q1/21
Q2/18
Q3/18
Q4/18
Q1/19
Q2/19
Q3/19
Q4/19
Q1/20
Q2/20
Q3/20
Q4/20
Q1/21
2023E
2023E
Q2/21E
Q3/21E
Q4/21E
Q1/22E
Q2/22E
Q3/22E
Q4/22E
Q2/21E
Q3/21E
Q4/21E
Q1/22E
Q2/22E
Q3/22E
Q4/22E
No. of active customers growth, LTM, y/y (%) Conversion rate, LTM (%)
Source: SEB Source: SEB
Site visits growth forecasts, LTM, y/y (%) AOV forecasts, LTM (SEK)
120.0 600
100.0 98.5
580 581
579
580
83.4
80.0 78.3
571
70.0
564 565 565
563 563 562
560 560
60.0 560 557 558 557
48.1
43.6 550
42.4 41.9
39.0
40.0 35.8
33.0
30.7
540
24.9
20.0 18.8
15.6
12.0
0.0 520
Q2/19
Q3/19
Q4/19
Q1/20
Q2/20
Q3/20
Q4/20
Q1/21
Q2/19
Q3/19
Q4/19
Q1/20
Q2/20
Q3/20
Q4/20
Q1/21
Q2/21E
2023E
2023E
Q3/21E
Q4/21E
Q1/22E
Q2/22E
Q3/22E
Q4/22E
Q2/21E
Q3/21E
Q4/21E
Q1/22E
Q2/22E
Q3/22E
Q4/22E
No. of visits growth, LTM, y/y (%) Average order value, LTM (SEK)
Source: SEB Source: SEB
12M trailing operating KPI forecasts
Footway Group - LTM KPIs Q2/20 Q3/20 Q4/20 Q1/21 Q2/21E Q3/21E Q4/21E Q1/22E Q2/22E Q3/22E Q4/22E 2023E
No. of visits, LTM ('000) 56,202 54,345 73,009 91,846 103,089 107,880 124,115 136,045 148,038 153,068 172,520 229,452
No. of active customers, LTM ('000) 1,226 1,278 1,404 1,592 1,533 1,661 1,706 2,324 1,962 2,160 2,305 2,989
Conversion rate, LTM (%) 3.06 3.28 2.67 2.44 2.39 2.44 2.34 2.29 2.30 2.35 2.28 2.22
No. of orders, LTM ('000) 1,718 1,780 1,946 2,244 2,469 2,630 2,900 3,114 3,403 3,600 3,938 5,101
Average order value, LTM (SEK) 581 564 560 563 557 565 565 563 558 557 560 562
No. of visits growth, LTM, y/y (%) 18.8 12.0 42.4 78.3 83.4 98.5 70.0 48.1 43.6 41.9 39.0 33.0
No. of active customers growth, LTM, y/y (%) 9.0 12.7 18.3 35.8 25.0 30.0 21.5 46.0 28.0 30.0 35.1 29.7
Conversion rate, chg, LTM, y/y (pp) (0.42) (0.14) (0.67) (0.81) (0.66) (0.84) (0.33) (0.15) (0.10) (0.09) (0.05) (0.07)
No. of orders growth, LTM, y/y (%) 4.4 7.3 13.9 34.0 43.7 47.8 49.0 38.8 37.8 36.9 35.8 29.6
Average order value growth, LTM, y/y (%) 5.6 (1.1) (3.6) (2.7) (4.1) 0.1 1.0 (0.1) 0.2 (1.3) (1.0) 0.5
Source: SEB
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AUSTRALIA OR IN ANY OTHER JURISDICTION WHERE TO DO SO WOULD BE UNLAWFUL.Corporate Research Footway Group 19 May 2021 20
Gross margin recovery well underway
Footway has recorded negative gross margins in recent years of around 43% in
2017 and 37% in Q1 2020 (based on 12 months trailing gross profits and
sales). We believe this reflects particularly difficult and markdown-driven retail
markets, as well as Footway’s decision to drive sales growth with lower
contribution margins (focus is on increasing gross profits in absolute terms).
12M trailing gross margin forecasts (%)
44.0
43.1
43.0 42.7
42.6
42.3
42.1 42.1 42.2
42.0 42.1
42.0
42.0
41.7
41.6
41.0
40.5
40.2
40.0 39.7
39.1
39.0
38.2
38.0 37.8 37.8
37.7
37.6
37.3
37.0
36.0
Q4/17
Q1/18
Q2/18
Q3/18
Q4/18
Q1/19
Q2/19
Q3/19
Q4/19
Q1/20
Q2/20
Q3/20
Q4/20
Q1/21
Q2/21E
Q3/21E
Q4/21E
2023E
Q1/22E
Q2/22E
Q3/22E
Q4/22E
LTM GM (%)
Source: SEB
Over our forecast period to 2023, Also, Footway’s decision not to increase its share of private label sales, which
we expect Footway to maintain a typically carry higher margin levels of around 60% compared with A-brand
low share of sales from private margins at around 40%, has not offered an opportunity to mitigate margin
labels (below 5% in Footway), pressure from markdowns and campaigns. Over our forecast period to 2023,
including in Sportamore (we we expect Footway to maintain a low share of sales from private labels (below
estimate at about 10%) 5% in Footway), including in Sportamore (we estimate at about 10%).
We believe the upside in gross Rather we believe the upside in gross margins comes from inventory
margins come from inventory management to reduce markdown sales. Today, inventories are very high
management (lower markdowns) compared with sector peers and the target is to reduce inventory-to-sales to
and economies of scale from 35% in the medium term. The integration of Sportamore has brought significant
higher volumes in buying increases in economies of scale from higher volumes in buying. Indeed, in Q1
2021 the 12-month trailing gross margin increased by 3.2pp y/y to 40.5%.
12M trailing gross margin change, y/y (pp) Inventory management forecasts (%)
5.0 90.0
4.3
4.0 3.7 80.0
75.5 74.8
3.2
70.4
3.0
70.0
2.3 64.1 64.6
2.0 62.4 63.3
62.0
2.0 59.7 59.8
1.5 60.0 57.7 58.4 58.4
56.4 56.0
1.0 0.7
0.6 48.6
0.4 50.0 48.0
0.2
43.0
0.0 41.0
(0.1) 40.0
(0.4) 36.0
34.2
(1.0) 35.0
30.0
(2.0) (1.7)
(2.4) 20.0
(2.5)
(3.0)
(3.3)
10.0
(4.0)
(3.9)
(4.1)
0.0
(5.0)
Q1/18
Q2/18
Q3/18
Q4/18
Q1/19
Q2/19
Q3/19
Q4/19
Q1/20
Q2/20
Q3/20
Q4/20
Q1/21
Q2/21E
Q3/21E
Q4/21E
Q1/22E
Q2/22E
Q3/22E
2023E
Q4/22E
Q4/18
Q1/19
Q2/19
Q3/19
Q4/19
Q1/20
Q2/20
Q3/20
Q4/20
Q1/21
Q2/21E
Q3/21E
Q4/21E
Q1/22E
2023E
Q2/22E
Q3/22E
Q4/22E
LTM GM, chg, y/y (pp) Inventory/sales, LTM (%) Inventory/sales medium-term ambition (%)
Source: SEB Source: SEB
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