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Shoes.com stays on the sidelines amid frosty market for IPOs

Shoes.com Chairman and Co-founder Roger Hardy.

Darryl Dyck/The Globe and Mail

Another top Canadian IPO candidate is choosing to stay on the sidelines amid a frosty market for new initial public offerings.

Roger Hardy, chief executive officer of Vancouver-based online footwear retailer Shoes.com, said the firm had considered going public in the first half of 2016. But given the sluggish economy and cool market for new tech stocks, "It's probably tempered my view that the first quarter for sure was the time to go public," Mr. Hardy said in an interview. "It looks clearly like it wouldn't be the best time." If things improve in the new year, he said, the company might look to go public next fall, he added.

The North American market for tech IPOs has been slow of late, and this week, John Ruffolo, head of the venture capital arm of the Ontario Municipal Employees Retirement System (OMERS), told Bloomberg TV Canada that two of the pension fund's top tech investments, Hootsuite Media Inc. and D2L Corp., probably won't go public until after 2016.

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"It's hard not to agree this is not the ideal time to choose" to go public, Mr. Hardy said. "You want to do these transactions into a hot market."

The company has seemed destined for a public markets debut ever since Mr. Hardy joined as CEO in mid-2014, on the heels of selling his publicly traded online eyewear retailer, Coastal Contacts, to Essilor International for $430-million. Shoes.com started out in early 2012 as Shoeme.ca, when a young Coastal Contacts executive, Sean Clark, decided to launch a Canadian-focused online shoe retailer after U.S. giant Zappos pulled out of the market. Mr. Hardy and several other Coastal executives backed Mr. Clark from the outset.

Mr. Hardy not only brought public markets experience to the shoe retailer but also much of Coastal's former senior management team. Mr. Clark, the founder, is now chief revenue officer.

Under Mr. Hardy's leadership, the company quickly engineered acquisitions of three established North American online retailers (including Shoes.com), opened a new distribution centre, expanded its offering to more than 30,000 different inventory items, and set out to open a handful of physical stores across the continent. Thanks to both its acquisitions and strong organic growth, the company is expecting to book $300-million in gross revenue this year – up from $60-million in 2014. Mr. Hardy said the company is expecting revenue from its existing business to grow by 30 per cent next year. He also hopes to close a pair of acquisitions in 2016, with an eye toward grossing more than $450-million in revenue next year.

While shoe merchants have been online for two decades, Mr. Hardy argues there remains much room for growth: The North American footwear market is worth about $80-billion (U.S.), but just 10 per cent of shoes are sold online in the United States, while the figure is about 1 per cent in Canada. That compares to music and books, where online sales account for more than half the total.

The company had originally eyed doing an IPO this year but stalled when it instead raised $46.5-million from private investors in May, valuing the company at about $320-million. Mr. Hardy said he has "heard all the pitches" from investment bankers and that Shoes.com "is mature enough and at a stage where it could easily do an IPO" when the time is right.

As for who might take Shoes.com public, it should be noted that Coastal used Canaccord Genuity, Bank of Montreal and Dundee for investment banking work when it was public. There could also be one or more U.S. underwriters in the mix, as the company intends to list in both Canada and the United States when it does go public, Mr. Hardy said.

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About the Author

Sean Silcoff joined The Globe and Mail in January, 2012, following an 18-year-career in journalism and communications. He previously worked as a columnist and Montreal correspondent for the National Post and as a staff writer at Canadian Business Magazine, where he was project co-ordinator of the magazine's inaugural Rich 100 list. More

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