What is happening at Shop Direct?

Posted by Haesoon Jung on

In 2017 Shop Direct lost three senior executives to Missguided. Why?

Shop Direct was apparently on the market in January 2017. By July 2017 the brothers pulled the sale. Shop Direct had been priced at £3bn. In October 2017 Shop Direct placed its first Bond, earning the brothers about £30m.



Source: Screenshot Dec, 2017

Shop Direct was slightly late to the ecommerce party but has become a significant player in the market with its Very.co.uk domain. However, looking at a group level revenue one could be excused for thinking the company is a high street retailer with low single percentage year on year growth levels.

Shop Direct financial performance

Source: Shop Direct

While revenue has grown steadily at a few percentage points, underlying PBT and EBITDA has more than doubled in the same period indicating a strategic initative contrasting with both Amazon and Zalando, where profits are sacrificed to drive revenue.

Pure speculation... ?

Let us speculate that the owners planned to sell the company and incentivised the senior management towards the maximisation of a £3bn valuation by focusing on profit KPI's. Once the deal fell through in July 2017, obviously something happened that was unacceptable by the senior management team.

Retail Gazette also reported the CEO, Alex Baldock, is stepping down next year.Again, our speculative view is that Alex was brought in to manage the sales process, based on his lack of retal experience and extensive career in banking.


Source: Author's photograph from Missguided Westfield, Stratford.

Valuation

The £3bn valuation mentioned in various press outlets would represent 1.5 x Rrevenue, 12.7 x EBITDA and 18.7 x PBT. At this level a sales would have falled in betwen Joules 2016 IPO and JImmy Choo's 2014 IPO.

 Staff movements

 Name Position at Shop Direct Joined Missguded Linkedin
Jonathan Wall Ecommerce Director Sep, 2017 link
Gareth Jones Group Deputy CEO & COO Sep, 2017 link
Kenyatte Nelson Group Marketing Director early 2018 link

 

Check out our FREE Unicorn Diagnostic on Missguided


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