Every now and again a big business story manages to break out of the back pages of newspapers (where business stories normally end up) and find their way onto the front pages – or Twitter’s ‘what’s trending’ list.
Jimmy Choo being up for sale is one of those stories. Let’s be straight about something here. At Economy, we normally aren’t that interested in stories about big businesses buying other big businesses. Honestly, it’s all a bit boring – soz – and it doesn’t seem that relevant to our daily lives.
But then something like this creeps up and it grabs our attention. Yes, because it’s trending on Twitter – but also because it’s Jimmy Choo.
I mean, let’s be honest, none of us here actually own any Jimmy Choos (they retail at like $400) but we’ve watched Sex and the City. We know it’s a thing. The fact is Jimmy Choo is a recognizable, luxury brand, which made the whole businesses being for sale thing a teensy bit more interesting, so we thought we'd have a look at what's going on.
Carrie Bradshaw must be weeping. Does this mean the end of the Choo?
Not really. Putting something up for sale in the business world doesn’t necessarily mean things are going badly. In fact, in Jimmy Choo’s case, they’re actually going pretty well.
The company, which is worth around £700m ($894m), had a big year last year. In its most recent results – basically a report card of how well the company’s doing – it said the amount of money it was taking in (or ‘revenue’, mostly down to the amount of shoes it sells) rose by 14.5% from £317.9m in 2015 to £364m last year, and the amount of profit it made – so the sales minus any costs the company has – increased by 42.6% to £42.5m (from £29.8m the year before).
Jimmy Choo says that main reason for its success is because it’s branched out into luxury trainers, and they've sold well. But some people are also arguing it's because the company is making the most out of the 'weak' pound in the UK – you can read more about that here. If the pound is worth less money (which is what people mean when they say weak) it makes it much cheaper for people from overseas to buy goods in the UK so people are buying luxury goods from UK businesses like Jimmy Choo.
If it's so super successful, why sell it?
A lot of Jimmy Choo is owned by a big investment company called JAG Investments. They own bits of a few luxury companies, but are apparently planning on getting rid of those to concentrate on food companies – they want to challenge huge names like Nestle – so that’s part of the reason.
In 2014, shares in the company were put up for sale on the UK stock market - known as ‘floating’ (do not ask us why it’s called that, we do not know). When a company gets to a certain size, it will often ‘float’ as a way of making money. People who buy shares (known as investors, or shareholders) can then sell their bit of the business off for more than they bought it for as the business gets bigger and bigger and more valuable.
The directors said the move to sell came after the company decided to review its business strategy to “maximize value” for those shareholders. That’s all they said really, but you can assume that they think a new buyer might be able to make the business bigger – people think it’s likely to be bought by a big American luxury company for example, or maybe someone in Asia or the Middle East. Someone with loads and loads of money basically. When one big company buys another big company like this it's normally referred to as a 'merger' or an
When the ‘surprise’ decision was announced Monday the ‘market’ – or basically all the people who buy and sell shares in random businesses – obviously thought it was a good idea, because people were suddenly willing to buy Jimmy Choo shares for 10% more than they were before the announcement. This is what’s called the 'share price' rising. And that’s what all the financial newspapers are reporting this morning.
So it’s not really about shoes at all. We’ve all been tricked.
