Shoe queen steps into the market, again

Aiden He

Belle Fashion, the queen of women's shoes in China, is looking to list in Hong Kong, five years after going private.

The retailer has applied for an initial public offering in the city and the size of fundraising could reach US$1 billion (HK$7.8 billion).

After transforming its business and reversing a decline in profits, Belle hopes its re-entry into the market will provide fresh funds for development as well as raise its brand profile, according to its prospectus.

Belle Fashion's parent Belle International is China's largest retailer of women's footwear.

It went public in Hong Kong in 2007 and over the following years expanded rapidly, acquiring several brands including Millie's, Mirabell, Senda and SKAP, which later became its bestsellers.

It more than tripled its retail footwear outlets from 3,732 in 2007 to some 13,000 in 2013 and was included in the benchmark Hang Seng Index in 2010.

But the good times did not last. From 2014, Belle International's footwear business - its main source of profits - deteriorated as the rise of e-commerce squeezed traditional stores.

In 2017, a consortium led by Hillhouse Capital and Belle's senior management team took the blue-chip firm private in a deal that valued it at HK$53.1 billion, only a third of its 2013 peak. By then, its annual net profit had nearly halved to 2.4 billion yuan (HK$2.95 billion) from 4.76 billion yuan for the year ended February 2015.

Two years after the deal, the owners spun off Belle's sportswear unit as Topsports International (6110). And now it's the turn of the footwear arm, Belle Fashion.

A series of initiatives to optimize operations and enhance productivity were implemented after the privatization that allowed it to capture diverse demands from a broader customer base and accelerate its digital transformation.

As a result, revenue from online sales jumped from below 7 percent during the year ended February 2017 to over 25 percent during the nine months ended last November, while revenue from department stores fell below 45 percent from over 70 percent, the filing shows.

Although Belle Fashion says its apparel business, which consists of partner brands like Champion and its own brands, has "expanded significantly and become a key growth driver" in recent years, shoe sales contributed more than 86 percent of its revenue over the past two years and is still its core business.

In 2020, it was China's top fashion footwear retailer with an 11.2 percent market share, far ahead of the second-placed competitor's 5.5 percent share, according to consulting firm Frost & Sullivan.

Its revenue rose by 8 percent to 21.7 billion yuan in the year ended February 2021 from a year earlier while its net income jumped 50 percent to 2.7 billion yuan.

But Belle Fashion warns that consumers may be more reluctant to spend money on footwear, apparel and bags if China's retail market becomes stagnant - foot traffic in offline stores has been affected during the pandemic, and retail sales of soft fashion products fell by 6.2 percent in 2020.

The firm believes its success depends on the value and reputation of its brands and says any damage to them may adversely affect its business. In particular any national sentiment against the home countries of foreign brands may affect the sales of their products.

Belle Fashion is the licensed partner or distributor of US brands Cat, Hush Puppies and Champion, the UK brand Clarks, as well as Moussy and SLY from Japan.

It plans to use the net proceeds to repay its loans - it owed lenders HK$3.8 billion as of last month - and further develop its brand and product portfolio.

Bank of America Securities and Morgan Stanley are joint sponsors of the listing.