Text | AI Finance and Economics Tang Yu
Edit the | Yang Shufang
On July 27, Belle International Holdings Limited (hereinafter referred to as “Belle”) was officially delisted from the Hong Kong Stock Exchange with a valuation of HK$53.135 billion. The “generation of shoe king” Belle’s Hong Kong Stock Exchange years have come to an end.
In terms of numbers, this is the largest privatization in the history of the Hong Kong Stock Exchange, and the amount is comparable to the total privatization of Hong Kong stocks by Jack Ma and Wang Jianlin, but the voice of “cheap selling” is still endless.
When it was listed in 2007, Belle’s market value was as high as HK$67 billion, and at its peak, it reached HK$150 billion, which was nearly two-thirds lower than the delisting price. Belle’s two founders, Chairman Deng Yao and CEO Sheng Baijiao, did not participate in the acquisition, but sold their 25.74% stake. After the privatization is completed, the two will cash out tens of billions and leave the market.
Belle once held the throne of “Chinese shoe king”. In the ten-year journey of the Hong Kong market, the impact of e-commerce, the aging of brands, and the mushrooming competitors have gradually forced them onto the road of delisting.
The era of the “king of shoes”
Belle, whose name is taken from the French Belle, seems to have targeted the female market from birth.
Belle’s predecessor was a footwear foundry with assets of only HK$2 million. During the reform and opening up of the mainland, founder and chairman Deng Yao smelled business opportunities and moved from Hong Kong to Shenzhen in 1992 to establish Belle Group.
The women’s shoe counter on the first floor of the department store is the starting point of Belle. Belle started as an agent of women’s shoe brands, and was the main agent of fashion brands Bata, CAT, Clarks, American urban leisure brands Dockers, Levis and sports brand Nike in China. In 2006, Belle’s operating income reached HK$5.3 billion.
In May 2007, Belle was successfully listed on the Hong Kong Stock Exchange, with a market value of HK$67 billion at the beginning of its listing.
With the blessing of capital, Belle began to vigorously acquire and create its own brands, forming its own brand matrix. In 2007, Belle reportedly bought Senda for $1.6 billion and Millies for HK$600 million. Belle’s official website data shows that the company currently has 14 brands including Belle, Teenmix, Tata, and Stecato (Sigato).
In the traditional footwear and apparel retail industry, street stores and department stores are almost the only channel choices for consumers. Sheng Baijiao, CEO and executive director of Belle International, once said proudly: “Wherever women pass by, there must be Belle. In order to quickly occupy the market, Belle began to open stores in a crazy manner.
From 2010 to 2012, Belle shoe stores opened an average of four or five stores a day in Chinese mainland, adding 5,340 shoe sales points in three years.
In 2011, Belle’s performance reached its peak, with revenue of HK$29 billion and net profit of HK$4.2 billion. Compared to 2006, the revenue has increased by more than 5 times. With the sharp rise in Belle International’s share price, Deng Yao ranked 9th on the Hong Kong rich list with a net worth of US$4 billion and 281st in the world.
In 2013, Belle’s market capitalization once exceeded HK$150 billion, second only to Baidu and Tencent among the private companies listed in China at that time. Belle thus became the largest shoe retailer in China and was named the “Shoe King”.
Department stores decline
Cheng Ye Xiao is also Xiao He. With the killer feature of offline retail network, Belle has achieved the supremacy of the footwear industry, but after the rise of Internet retail, the huge retail network has become Belle’s biggest drag.
In fact, since 2012, Belle has been on the decline, with net profit increasing by only 2%, and since then net profit has not grown at a double-digit rate. In 2015, Belle’s net profit fell 38%. Prior to this, except for fiscal 2008, Belle’s net profit growth rate has remained above 20%.
Belle’s announcement attributed the reason to the impact of e-commerce and the decline of department stores.
With the rise of Alibaba’s Taobao, Tmall and JD.com e-commerce platforms, the traditional retail industry and department store-related clothing, shoes and hats have been strongly impacted.
According to a survey by the China Department Store Business Association, department store profits fell by 12% year-on-year in 2015. Half of the 80 department stores it surveyed saw significant sales declines.
Belle, which is overly dependent on department stores, bears the brunt. After 2014, Belle’s expansion slowed down significantly and even began to close stores. According to the financial report, the number of Belle stores closed in 2015 decreased to 366, almost an average of one store a day. In the same year, Belle International’s net profit fell sharply for the first time, the first profit decline in nine years since listing.
E-commerce brings not only the impact of channels, but also more competitors. There are countless brands for consumers to choose from in e-commerce platforms. In addition, some “Internet celebrities” who rely on the rise of social software have also begun to enter clothing and women’s shoes, and they know how to cater to the preferences of young people better than Belle.
Countless overseas daigou and overseas amoy are also stealing Belle’s share. According to Amazon’s 2016 Cross-border E-commerce Trend Report, clothing and footwear are the most popular categories among Chinese consumers.
In fact, Belle began to expand online channels early on. In 2009, Belle founded the e-commerce platform “Taoxiu.com”, and in 2011, Belle established Yougo.com, introducing Xu Lei, former vice president of JD.com, and Zhang Xiaojun, vice president of Vancl Eslite, as CMO and COO of Yougo.com respectively. But a year later, the two left one after another.
One of Belle’s problems is that it only uses e-commerce brands as a clearance channel. That didn’t help save it from decline. According to reports, Belle CEO Sheng Baijiao once said that he chose e-commerce because he did not have the energy and financial resources to operate shopping centers, but found that online channels also require a lot of investment.
Belle’s decline has become so obvious that it is difficult to hide. In 2014, 2015 and 2016, the operating income was HK$50.474 billion, HK$48.452 billion and HK$47.083 billion respectively, and the net profit was HK$6.01 billion, HK$3.485 billion and HK$2.713 billion respectively. Within three years, net profit plummeted 55 percent.
An outcast in the fashion wave
“Varied, so beautiful.” This used to be Belle’s advertising slogan, but the update speed of Belle’s style has obviously not kept up with the aesthetic changes of consumers.
Belle’s last hit was in 2011, when Belle’s Sigato and Xu Haoying collaborated to promote muffin sandals. At that time, this shoe became the object of imitation and plagiarism by many brands. But now the most popular little white shoes, lace-up shoes, pom-pom-decorated shoes… None of them came from Belle’s brands.
The most popular footwear market in recent years is sneakers. In addition to fitness, women began wearing sneakers to work, dates, and even matching skirts or suits. Belle’s 12 brands are mainly dressed shoes, which are not attractive to young people. Its financial report also disclosed: “Fashion shoes and dress shoes are overcovered, and the proportion of sports and leisure style is relatively insufficient.” ”
In addition, due to the lack of original design capabilities, following the trend of imitating big brands has become a stopgap measure for Belle. But compared with fast fashion brand stores such as ZARA, C&A, H&M, and Hot Air, Belle’s sense of smell is relatively dull. Often a shoe is popular for a while, Belle’s products will follow.
For example, Chanel launched a color-block mid-heel shoe during the autumn/winter collection runway in April 2015, Zara launched such a style in early 2016, and Belle launched a similar shoe in the spring of 2017.
Nowadays, consumers are accustomed to the “fast consumption model”. Whoever is the first to launch the new model will be able to seize the opportunity. Belle’s speed is obviously too slow.
In addition, Belle’s cost performance is also relatively low, and the original price of its women’s shoes is hundreds of yuan to thousands of yuan a pair. As soon as the news of Belle’s delisting was reported, many netizens in the comments complained that Belle’s shoes were ugly and expensive.
In fact, Belle is already aware of this situation. In recent years, it has been adjusting its business structure and began to transform into sports and apparel. The proportion of footwear business as the main business in the group has been declining, and from 2014 to 2016, the proportion of footwear business in the total business revenue fell from 57.6% to 45.5%.
As of February 28, 2017, Belle achieved revenue of about 41.707 billion yuan, a year-on-year increase of 2.25%; Operating profit was about 3.555 billion yuan, a year-on-year decrease of 15.38%. Among them, the revenue of sports and apparel business increased by 15.4% from 19.716 billion yuan to 22.746 billion yuan.
After privatization, Hillhouse Capital will become Belle’s new majority shareholder, holding 57.6% of its shares; CDH Investment, the second largest shareholder, accounted for 11.9%; The remaining 30.5% is jointly owned by Belle’s other management.
In fact, Hillhouse, CDH, etc. have a deep relationship with Belle. Hillhouse Capital had previously bought Belle International’s shares through the secondary market and held them for many years. CDH invested in Belle International in 2006 to help it quickly set up an online store across the country. In 2013, CDH also acquired Japan’s Baroque Group with Belle.
Belle’s last annual report before privatization showed that in 2016, although the company’s footwear retail outlets decreased by 700, the number of sports and apparel self-operated retail outlets increased by 543, and the overall remained stable, and the total number of Belle’s self-operated retail outlets was 20,841 as of February 28, 2017.
Even if it is delisted, Belle’s hole card remains. So the new question is, will Hillhouse Capital and CDH be Belle’s lifesaver?
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