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Liberum kicks off Footasylum coverage with gushing 'buy' note

Liberum analyst Wayne Brown is a big fan of the management team, product offering and growth potential at the ‘on-trend’ fashion retailer
footasylum store
Footasylum stores are a bit different to your average trainer or clothes shop

Footasylum PLC (LON:FOOT) shares were in demand on Wednesday after Liberum kicked off its research coverage of the ‘on-trend’ fashion retailer with an effusive ‘buy’ recommendation.

The AIM-listed firm – which sells own and third-party brand trainers, hoodies and athleisurewear – is a newcomer to the market, having only listed on AIM last November.

It was set up by David Makin and John Wardle – the two founders of JD Sports Fashion PLC (LON:JD.) – and is run by Makin’s daughter Clare Nesbitt, while former JD boss Barry Brown will replace Wardle as chairman later this year.

Experienced management team

Liberum analyst Wayne Brown reckons this experience will be key for Footasylum going forward.

“Led by a strong management team with a proven track record of executing a high growth strategy and supported by the heritage and experience of the co-founders of JD Sports,” he wrote in the report.

“The appointment of Barry Brown (Chairman) reinforces the pedigree of the senior team.”

Know what the punters want

Having run JD for a number of years, the analyst believes Makin, Wardle & co have “a deep understanding” of their customers, which is demonstrated in the lively store layouts which sets Footasylum apart from its peers.

“Theatrically entertaining retail spaces with relevant product are important at driving footfall and providing differentiation against peers in a competitive landscape,” wrote Brown.

“This is not something that is being delivered by many of its competitors.”

As you’d expect from a young company targeting the 16-24 demographic, Footasylum has invested heavily into its digital platforms which Brown reckons has allowed it to achieve “market-leading online penetration rates”.

It's coming for JD, Schuh et al ...

Online sales account for around a third of total revenues, but the analyst thinks there is more room for that to grow in the future.

Brown is also convinced that there is a lot of opportunity for further growth across the business as a whole.

“It has a current UK footwear market share of just 1.1% and 0.1% of the UK clothing market.

“Growing from a small base of c.60 stores and only £147m of sales in FY17A, it should take share in markets that are forecast to grow 3.9% and 3.0% per annum, respectively, between FY16-21.”

Footasylum shares jumped 3.3% to 254.7p on Wednesday morning.

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