Belle's valuation has shrunk by 40% over the past two years

Faced with the fact that sales growth and profit growth in 2012 are all historically low, Bailey, the leading footwear company in China, has taken the first step in finding new points. Last week, its announcement stated that it had spent 733 million yuan to buy 31.96% of the shares of Baroquejapan, a Japanese women's retail company. At the same time, it is planned to establish a joint venture with Baroque in China to enter the apparel and accessories industry. Belle Group acknowledged that last year was a difficult year in its 20-year business history. Both sales growth and profit growth were at historically low levels. As Belle said in its 2012 annual report, this time the apparel market was understood to be Belle’s Look for new growth points.

Baroque’s valuation has shrunk by over 40% for two years

According to its announcement, its wholly-owned subsidiary, Puguan, Ding Hui, Sewing, and Clsasunrise Capital, l. p Entering into the share purchase agreement, Puguan agreed to acquire 31.96% of the shares of Baroque Japan for HK$733 million. Belle will establish a series of joint ventures with Baroque through a wholly-owned subsidiary Chengzhuo Co., Ltd. to develop apparel and accessories business in China. The total investment of the above two investments is expected to not exceed HK$924 million.

The Board of Directors believes that this move will provide the Group with opportunities to explore the Chinese fashion industry and is expected to increase the coverage of the Group's consumer market. According to a reporter's query on Baroque's official website, as of April 30, 2013, Baroco operated a total of 14 products and a collection of store brands with 348 stores. However, the number of stores in Japan is as high as 319, accounting for 91.7% of the total. There are only 29 overseas stores located in mainland China and Hong Kong. In 2009, it landed in Shanghai and officially entered the Chinese market. Baroque once hoped to accelerate the expansion of business development in Greater China.

In 2011, Baroque once planned to raise 200 million U.S. dollars (approximately HK$1.56 billion) in Hong Kong. At that time, the sponsor’s listing report prepared by Lyon at the end of 2011 showed that Baroque’s earnings for the year 2011 (as of the end of January) At approximately HK$280 million, Lyon gave the company a valuation of HK$411-5.8 billion. At the end of January 2011, it had 26 stores in the Mainland and Hong Kong.

However, the plan was shelved because of the unfavorable market conditions. Baroque, which lacks local retail experience, has almost stagnated at home in the next two years. From 2011 to April 30 this year, its stores in Greater China have only increased by 3 to the current 29. With the estimated value of 41.8 billion yuan in 2011, Belle now has a share of 31.96% with HKD 733 million, which shows that Barroque is worth HKD 2.3 billion, which is more than 40% lower than that of the previous year.

"Barok sees more of Belle's channel advantages." An apparel industry veteran told reporters that as of June 30 this year, Belle had 18,316 retail outlets in China.

While acquiring a brand that is still immature in the Chinese clothing market (9.32, 0.37, 4.13%), Belle also has its own wishful thinking. Belle stated in the above announcement that the Board of Directors believes that this investment provides an opportunity for the Group to explore the Chinese fashion industry and is expected to increase the coverage of the Group's consumer market.

According to Zhu Qingyu, a light industry researcher at China Investment Advisors, the cross-border management of footwear companies will be the trend of the future. "On the one hand, the shoe industry and the apparel industry have a high degree of integration. The combination of the two will not obscure the brand positioning of shoe enterprises. On the other hand, the integrated development of shoes and clothing will increase the anti-risk ability of shoe enterprises and further influence them. expand."

Cross-border ambition

At present, Belle has a total of two businesses, one is a footwear business, and the other is a sportswear business such as Nike, adidas, puma, and converse. However, these two businesses were affected by the overall environment last year, and the fast track of growth that has continued for many years was blocked. "2012 was a difficult year for the Group's 20-year operating history. Sales growth and profit growth were at historically low levels," Belle said in the 2012 annual report.

The reporter reviewed Belle's 2012 annual report and learned that in 2012 Belle's annual sales were HK$32.86 billion, a year-on-year increase of 13.5%, which was the first time Belle had exceeded the 30 billion mark since listing. However, its operating profit only slightly increased by 2.6% to RMB 5,403 million, the slowest growth rate for the past five years.

In 2012, the sales volume of footwear business was 21.045 billion yuan, a year-on-year increase of 13.6%. Compared with the previous two years, the growth rate was significantly slowed by about 25%. Performance profit margin has fallen by more than 1 percentage point. The sales of sportswear in 2012 were 11.814 billion yuan, a year-on-year increase of 13.5%. However, the performance profit rate dropped by 2.4 percentage points. "For domestic sports brands, the main problem is to digest the past inventory backlog, the declining retail store efficiency, and the high cost, resulting in continuous negative orders growth, brand operators are facing negative operating leverage pressure." Belle believes that the sportswear market is difficult in the short term There is a clear recovery.

Faced with the unfavorable situation in 2012, Belle is also actively adjusting its internal strategy this year. “In the current market environment where department stores have poor customer flow and low consumer sentiment, the Group plans to moderate the pace of store expansion. In fact, this adjustment has been underway in Belle this year. This reporter learned that in 2012, Belle added 2614 new stores, but in the first half of this year, there were only 752 new stores in the domestic market, of which 442 were retail outlets for footwear and 310 were sportswear outlets.

This cross-border women's clothing may have been followed for Belle. Faced with the difficulties in the growth of the two major businesses of footwear and sportswear, Belle stated in its 2012 annual report that the Group will continue to actively explore emerging businesses, develop new market segments and new channels, and proactively provide long-term stability for the Group. Develop a good foundation.

The reporter repeatedly called Belle International to find out more details of the investment, but its staff said that the company did not want to disclose more news to reporters because it did not accept media interviews. "This is the strategic adjustment of Belle." For the cross-border into the women's industry, the aforementioned industry analysts said that Belle has a huge channel of resources, especially in the mall channel, which is consistent with women's clothing.

However, Belle did not have experience in the operation of women's clothing. According to this analyst, the most reasonable division of labor for the joint venture company is Baroque's responsibility for design and production, while Belle is responsible for the channel.

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Women's wear is not a good choice?

As for its selection of women's clothing as an emerging business, Zhu Qingyi, a light industry researcher at China Investment Advisors, described the current situation of the women's apparel industry to reporters: Currently, women's wear in the clothing market is saturated, and profitability is very limited. If Belle is only to counter the risk of business decline Women's clothing is not a good choice.

Zhu Qingyun believes that besides the impediment to the current business growth, Belle's entry into the apparel industry is also related to its development strategy of contrarian expansion.

"If Belle is currently seeking 'value for the land' and planning ahead, the prospects for follow-up development will be even more worth looking forward to," said Zhu Qingtao. And from Baroque’s two-year decline in valuations, Bailey’s acquisition at this time is actually cheaper than it was two years ago.

In Zhu Qingxuan's view, Belle's risk of entering women's clothing is low in profitability, and opportunities are manifested in the ability to resist risks or will be stronger.