이 기사는 2020년 05월 21일 08:00 thebell 에 표출된 기사입니다.

South Korean shoe brand El Canto posted mixed financial results last year, as revenue showed double-digit growth but operating income margin fell to 6.5 percent from the previous year’s 9.5 percent.

El Canto’s 2019 revenue increased 12 percent year-on-year to 77 billion won ($62.6 million), according to its latest audited financial statements. The footwear brand is owned by a consortium of two private equity investors – SKS Private Equity and Cape Investment & Securities PE – with an 89 percent stake. The remaining shares are held by Nau IB Capital.

The consortium acquired El Canto from retail conglomerate E-Land Group in 2016. The company has since grown steadily to reach double-digit revenue growth as a result of continued efforts to expand online sales and strengthen its brand image.

But El Canto’s operating income declined to 5 billion won from 6.5 billion won in 2018 due to an increase in cost of goods sold (CGS) as well as selling, general and administrative expenses (SG&A).

El Canto reported the CGS to revenue ratio of 45.9 percent, up 2 percentage points from 43.9 percent in 2018. The increased CGS was attributed to a sharp rise in the inventory reserve, an amount set aside in a company’s balance sheet in anticipation of inventory that will not be able to be sold. El Canto’s inventory reserve was 1.76 billion won at the end of 2019, up nearly three-fold year-on-year. But this was mostly due to changes in accounting estimates, meaning that the effect on the company’s financial statements will be temporary.

El Canto also saw the SG&A to revenue ratio climb to 47.5 percent from 46.6 percent in 2018 largely because of an increase in rent expenses.

Still the company’s double-digit revenue growth is a significant achievement compared to rivals SODA and Kumkang Shoe, which recorded a 6 percent and 21 percent decline in revenue, respectively, in 2019.

With more local consumers moving to online shopping, El Canto has focused on attracting new customers by expanding its online sales channels and launching several sub-brands targeting different types of consumers.

Last year more than 15 percent of El Canto’s revenue came from online sales, continuing to increase from 13 percent in 2018 and 11.5 percent in 2017. As the online sales portion is still relatively small, it is expected to grow further in the future.

El Canto’s private equity owners plan to exit their investment by taking the shoe brand public as early as the first half of this year, though the timing appears to be delayed due to the coronavirus pandemic. El Canto has appointed DB Financial Investment to lead an initial public offering.

(Reporting by Hye-ran Kim)