Gymshark: How going public could help take on ‘monster rivals’ Nike and Adidas
Gymshark, the activewear brand co-founded by billionaire Ben Francis, could be pushed towards becoming a public company in its bid to “achieve the kind of global domination enjoyed by monster rivals Nike and Adidas”.
According to Danni Hewson, head of financial analysis at AJ Bell, the Solihull-headquartered business would need to “amp up its presence” if it wants to take on its biggest competitors and might end up considering an initial public offering (IPO) to find the necessary funds.
Gymshark does have a “significant credit facility” at its disposal, but its pre-tax profit fell for a third consecutive year during its latest financial period.
The company achieved a valuation of more than $1bn in 2020 when it received the backing of New York-headquartered General Atlantic.
The private equity giant snapped up a 21 per cent stake in Gymshark in a deal which also saw Francis increase his holdings to more than 70 per cent.
At the time, General Atlantic said the deal is designed to “facilitate further growth and international expansion”, specifically into North America.
In its latest financial results, the brand pointed to its plan to “strategically invest in its well-documented omnichannel expansion, with stores confirmed in London, New York, Dubai, Amsterdam, Manchester, Bicester, and a New York City headquarters to drive its US business alongside continued investment into the digital technology stack which underpins Gymshark’s e-commerce business”.
The company declined to comment on the possibility of it floating when approached by City PM.
Gymshark is not the only UK activewear brand worth in the region of $1bn that could become a public company in the next years.
The co-chief executive of rival Castore recently said that the London Stock Exchange needs to offer something different if it’s going to convince his company to float in the UK.
Tom Beahon, speaking on an episode of City PM‘s Boardroom Uncovered podcast, said it would be “shame” if the brand didn’t end up choosing London and instead completed anIPO overseas.
Gymshark could target ‘global domination enjoyed by monster rivals Nike and Adidas’
Danni Hewson, head of financial analysis at AJ Bell, said: “Gymshark’s founder Ben Francis has made no secret of the fact that he has always had big expectations for his company, which started life in a Solihull gym.
“During the pandemic years, its online capabilities delivered staggering growth and there were rumours that an IPO was imminent.
“That IPO never materialised, perhaps to the relief of the company when you consider the fortunes of Asos and Boohoo.
“But growth has slowed in the intervening period and even though sales surpassed the £600m mark in its last financial year, profits have been nibbled away by rising costs and an increasing headcount.
“Gymshark is doing something about the latter and it has a significant credit facility at its disposal, but in order to achieve the kind of global domination enjoyed by monster rivals Nike and Adidas the company will need to amp up its presence and finding the funds to do that might just push the company towards a public listing.
“It wants more stores, especially now it’s found its true ‘concept’ within the bricks and mortar of its Stratford store, and that’s going to cost handsomely with those costs becoming embedded in the business model in terms of additional labour and property costs.
“But Francis has been canny up until now, and even though investors are seeking out exciting, well-run European businesses, they’re also hyper aware of the challenges facing retail and global supply chains.
“Gymshark has a point of view which makes it credible and relatable with its customer, but it’s operating in an extremely competitive market, so it’s vital it doesn’t overextend itself beyond what the market can handle.”
At the end of April, Gymshark also hit the headlines when it confirmed that almost 300 jobs had been put at risk.
At the same time, the company said it would be creating 168 roles “to help drive our future growth”.