Global Economics

NG2 Is Poland's Footwear Superstar


The shoe store chain has been racing ahead since 1990 and is now the largest homegrown Polish retailer

As a former Polish national bicycling champion, Dariusz Milek understands the value of endurance. Joining a throng of aspiring Polish entrepreneurs after the fall of the Berlin Wall, in 1990 he bought a bankrupt shoe factory in Polkowice—a town of 22,000 near the German border—and began selling shoes to street vendors. Eighteen years later, his business, now known as NG2 (CCCC.WA), has pulled to the front of the pack in Polish retailing.

NG2, an acronym for New Gate Group, now has more than 550 shoe stores across Poland and the Czech Republic, making it Poland's biggest homegrown retailer. Almost every shopping mall and main street in Poland boasts one of NG2's stores, which sell inexpensive footwear and accessories under the company's own brand names, including CCC, Boti, and Quazi.

Sales last year were $186 million, and with revenues up a healthy 43% during the first three quarters of 2008, the pace hasn't slackened during the global economic slowdown. "We continue to grow our network steadily and increase sales in existing boutiques," says Milek, 41.

Asian Factories

To keep costs low, NG2 now does most of its manufacturing in China and India, with only a few lines of higher-quality women's shoes still produced in the Polkowice factory. But unlike some competitors, the company says it directly controls its offshore factories, eliminating middlemen and contributing to a healthy 14.7% profit margin. Of its 557 stores, 374 are company-owned, and the others are owned by franchisees.

NG2 shares, listed on the Warsaw Stock Exchange since 2004, more than tripled in price between November 2005 and the middle of last summer, but have since lost half their value because of investor concerns about broader economic weakness. But Milek, saying the company expects "to maintain an above-average rate of growth," is pressing ahead with plans to open some 123 new stores next year in Poland and an additional 15 in the Czech Republic. For now, there are no plans to expand to other countries.

NG2 maintains a high profile with Polish consumers through extensive advertising on television, radio, and Internet. And—no surprise here—it's a sponsor of a Polish cycling team, CCC Polsat Polkowice. Indeed, Milek says there are strong parallels between retailing and bike racing, where tough competition is both a challenge and an inspiration. "The strongest become leaders, but I hope that there will always be someone to compete with."

Matlack is BusinessWeek's Paris bureau chief.

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