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Christmas is coming and the goose is getting fat. For Permira, the bird in question is Golden Goose. The UK private equity group hopes to list the Italian footwear brand in Milan early next year at a reported valuation of €3bn.
Fast-growing and highly profitable, Golden Goose appears to live up to its name. But narrowly focused fashion brands have a mixed history with public markets. Investors should be cautious.
Fashion is at best cyclical and at worst ephemeral. Turmoil at Gucci shows that even famous names get it wrong. Golden Goose, in contrast, is a challenger. Its distressed-look trainers cost about $500 a pair, reminding cynics of “Derelicte”, a spoof brand purveying the look of vagrants in the movie Zoolander.
It is hard to imagine Golden Goose enjoying the enduring appeal of Birkenstocks. The sandal brand helpfully tested the market last month when it listed shares in New York. Shares disappointed on debut but have made up losses since.
That precedent invites comparisons between the two businesses. Golden Goose and Birkenstock should both increase sales by about one-fifth this year. Both companies have ebitda margins in the low 30s.
The average price for Birkenstocks is about a tenth of Golden Goose sneakers at €50. But the top dog in clogs has a bigger market and merits a premium. An enterprise value of 20 times forward ebitda for Birkenstock beats the 15 times trailed for Golden Goose.
Dr Martens, like Golden Goose, is a niche footwear company backed by Permira. The maker of rock ‘n’ roll boots listed in London in early 2021.
The valuation back then was rich at more than 20 times ebitda. That has dwindled to less than 6 times today. The sole has peeled off sales growth. The story is similar at Tod’s of Italy, which trades on 7 times.
Bankers may well pull Golden Goose up by its bootstraps for a rating of 15 times at flotation. But longer term, the business will have its work cut out to convince investors it is worth a gander.
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