Shoe queen puts best foot forward

June Chen

China's shoe queen Belle Fashion has reapplied for an initial public offering in Hong Kong after it failed to pass its IPO hearing two years ago.

Belle Fashion's net profit increased by 92.7 percent to 2.1 billion yuan (HK$2.28 billion) in the first nine months of 2023 over the same period the previous year.

The group also saw its revenue rise by 12.8 percent to 16.1 billion yuan, while its net profit margin set a new record of 12.8 percent over the same period in 2022.

It was an uplifting recovery for the shoemaker whose net profit had plunged 54 percent to 1.26 billion yuan year on-year in fiscal 2022 amid the Covid pandemic.

Belle Fashion commanded a 12.3 percent share in China's fashion shoe market in 2022 and has retained its top spot for at least a decade in a row, according to Frost & Sullivan.

It markets 12 own brands and seven partner brands including Belle, Teenmix, Staccato, Basto, Joy&Peace and Millie's.

The five highest revenue earners are its own brands and among these Belle is its best seller, accounting for 28 percent of all revenue.

Initially founded in Hong Kong, Belle went public in the financial hub in 2007.

Between 2012 and 2013, Belle's market value was close to HK$150 billion and it had as many as 20,000 stores but as e-commerce grew in popularity, Belle's business, which heavily relied on brick-and-mortar store sales, turned sluggish.

A consortium led by Hillhouse Capital and Belle's senior management team took the blue-chip firm private in a deal that valued the company at HK$53.1 billion in 2017 - only a third of its 2013 peak - but also set a new record for a privatization deal in Hong Kong's stock market.

By then, Belle's annual net profit had nearly halved from 4.76 billion yuan to 2.4 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).

Hillhouse Capital, which also has invested internet enterprises like Tencent (0700), Didi and Meituan (3690), implemented many initiatives to optimize Belle's operations and enhance productivity.

Other initiatives, such as the digitalization of the industrial chain and development of an artificial intelligent system to help design shoes and clothes, allowed Belle to tap into diverse demands from a broader customer base and accelerate its digital transformation.

As a result, revenue from online sales soared from below 7 percent of total revenue for the year ended February 2017 to 27.7 percent for the nine months ended November 2023, the filing shows.

Belle ranked first in online fashion footwear sales by value in 2022, according to Frost & Sullivan and the manufacturer had a total of 8,361 stores in the mainland as of November last year.

From 2020 to 2023, Belle Fashion's sales and marketing expenses kept rising at an average of 8.73 billion yuan each year a total of 34.9 billion yuan in four years.

In 2023, these costs accounted for almost 45 percent of revenue.

From February 2022 to January 2024, Belle's loans rose to 4.8 billion yuan from 3.1 billion yuan, and more than half of its debts are short-term.

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