One of Russia's largest shoes producers and retailers Obuv Rossii (Shoes of Russia) IPO plans are undented by its first ever fall in revenues. The company reported 1.5% year-on-year turnover decline to RUB4.1bn (€60mn) in January-June 2017, the company said on September 6.

In August Obuv Rossii said it was preparing an IPO on Moscow Exchange for the this autumn, the second time the company has attempted to IPO. Previously the company tried to organise a public offering in 2013, but never followed through due to poor market conditions. 

The company is a classic play on the large Russian consumer market. Concentrating on Russia's regions, the company has built up a large retail network and sells shoes it has made in China to Russia's emerging middle class. It targets the middle of the market with a price point below the more expensive imported brand names, but offering high quality products. But the company also imports and sells a variety of imported brands as well.

Owner Anton Titov was still a kid when the Soviet empire collapsed, but his father was clearly an enterprising man, Titov told bne IntelliNews in 2013 in an exclusive interview when the company first tried to float. A retired soldier, Titov senior in 1993 started importing quality German shoes from Westphalia and opened a store in his native Novosibirsk in Siberia. The shoes flew off the shelf and the company, called Westfalika, soon made enough money to buy a factory at the cost of $500,000 - an enormous sum in those days - to make its own quality shoes.

Titov junior, 16 at the time, helped out with the business as a sales manager, eventually going on to become the head of marketing. "It was a university," says the ebullient Titov, who is still only 39 today. "There was no brand awareness in those days, no real competition. The only real problem was getting hold of enough shoes and selling them fast, as we had over 100% inflation but we had to pay for the imports with Deutschemarks," says Titov, adding that the biggest sellers were high-heeled ladies' shoes and boots for winter.

The company has come a long way in the last five years and Titov has just been on a road show in London to drum up interest in the company ahead of its IPO bid. However, this January-June the shoemaker suffered from abnormally cold weather in spring and early summer and saw its retail revenues decline for the first time on record by 10% y/y to RUB2.7bn.

Nevertheless, the company managed to contain the damage by more than doubling wholesale revenues to RUB0.7bn, cutting costs, and earning RUB0.7bn on consumer microloans. Net profit for the first half of 2017 made RUB0.37bn, inching up by 1% y/y.

The company hopes to see the situation improve in the fall as over 60% of its sales are usualling falling into the season as Russians prepare for the long winter.

In the meantime the valuation for the reported IPO stands at high 10x Ebitda of RUB2.4bn reported by the company under Russian Accounting Standards (RAS) for 2016, Kommersant daily said on August 10 citing unnamed market sources.  

Reportedly the retailer plans to raise RUB4-5bn in the offering, selling 15-20% of its shares, with the valuation of the company rising many-fold in the past four years to RUB24bn (€340mn). The IPO will be organised by Citi, Renaissance Capital, BCS and Sberbank CIB.

Previously, Vedomosti daily reported that Russian billionaire Mikhail Prokhorov (Oneksim Group), who has been selling off numerous assets, holds 24.99% in Obuv Rossii.