NexCen Brands, which purchased The Athlete’s Foot in 2006, is trying to expand its footprint in Europe, based on a new store concept that has already proven its worth in the U.S. TAF is in the process of rolling out this new store format in Portugal, where it has 11 franchised stores, followed by four stores in the Moscow area.
TAF closed its European office in Switzerland one and a half years ago, but it then NexCen appointed Benjamin Simon as development manager for Europe and Africa in order to make a comeback. A former manager of TAF's flagship store in New York, this French biomechanics consultant showed the new concept at the recent franchising shows in London and Paris, where he found a lot of interest among French and Irish retailers, but he wants to find the right master franchisees before developing these markets.
TAF, which is already present in 70 different countries,will probably sign the first new European contracts with master franchisees in the Nordic and Balkan countries. Elsewhere in Europe, it is meeting some skepticism because of mistakes committed in the past, notably in France and Spain. In Europe, only Denmark, Sweden, Portugal and Russia are covered at the moment. Its former Polish master franchisee decided not to renew its contract in 2009, after ten years of cooperation.
Meanwhile, the NexCen group is still struggling to improve its debt and capital structure. The company has reported a 17 percent drop in revenues to $10.6 million for the fourth quarter of 2009 ended Dec. 31. The company’s revenues consist mainly of royalties on the licensing and franchising of its various brands and banners. The latest figure includes the loss of $0.2 million in royalty revenues that the company stopped getting last August, when it took a one-time payment as a settlement for the termination of a licensing deal in Australia and New Zealand. The slump was also attributed to weak economic conditions, poor demand and store traffic and weak credit markets for franchisees.
Operating income improved to $1.1 million, however, reversing the $2.4 million loss suffered in the same period in 2008. The quarterly net loss was $0.5 million, against a net loss of $16.3 million in 2008. The loss from continuing operations was $0.8 million, an improvement over the loss of $2.1 million the year prior.
For the full year, NexCen’s revenues dropped by 4 percent to $45.1 million, largely because of poor customer demand, fewer stores and the previously mentioned end of a licensing agreement. Adjusted operating income came in at a positive level of $11.1 million, compared with negative $6.8 million in 2008. The adjusted loss for continuing operations was $2.7 million, better than the $17.0 million loss the year before. These figures have been adjusted for $0.6 million in costs for 2009, and $137.9 million in impairment charges and $5.0 million in other costs for 2008.
The annual loss was $2.8 million, compared with a loss of $255.8 million the year before.
At the end of the year, NexCen had 1,713 stores, down from 1,826 stores at the end of 2008. Over the course of the fourth quarter, it executed 71 new franchise agreements. The Athlete’s Foot had 530 franchised stores at Dec. 31, 30 fewer than the previous year. The company has appointed Tony Valles to be its new vice president for non-traditional development at NexCen Franchise Management, the company’s franchising subsidiary. He will focus on developing franchise locations in atypical retail sites such as convenience stores, airports and universities. He comes from a franchise consulting company he founded in 2006 (more on NexCen and its Shoebox franchising concept in Shoe Intelligence).
