BELLE'S First Profit Decline In Nine Years, Shares Fell 0.42%

International Holdings Limited today released its annual performance report for the year ended February 29, 2016. Last year, net profit plunged 38.4% to HK $2 billion 934 million, due to changes in consumer demand for footwear and the impact of e-commerce. This is the first time a profit decline has been recorded in the nine years since listing.

BELLE is mainly engaged in manufacturing, distributing and retailing footwear and apparel products.

Its own brands mainly include Belle, Teenmix, Tata, Staccato, Senda, Basto, Joy & Peace, Millie's, SKAP and Mirabell, etc.

Unlike footwear business, sports and apparel business is currently dominated by distribution agents, including front-line sports brands Nike, Adidas, PUMA and Converse, etc., as well as clothing brands Moussy and SLY.

Revenue and profit: as of February 29, 2016, the group's total revenue amounted to HK $40 billion 790 million 200 thousand, representing an increase of 2% in the year ended February 28, 2015. Net profit was HK $2 billion 934 million 100 thousand in the same period last year, down 38.4%.

Footwear business: last year, the sales volume of group footwear business decreased by 8.5% compared with last year, which was HK $210.742, mainly due to the same store sales fell by more than 10%.

The same store sales decline is mainly due to the decline in the number of pactions close to 10%.

The group closed 366 retail outlets of footwear in mainland China, which was relatively cold in the early part of last winter. It not only affected the sale of high price winter boots products at the beginning of the season, but also resulted in a partial discount in the sales center, a larger overall discount in the quarter, and a negative impact on gross margin, which recorded 67.3%.

Sports and clothing business: sales scale increased by 16.2% compared with the same period last year, HK $19 billion 716 million, while same store sales grew rapidly, reaching a high level of unit number. The contribution of quantity growth and unit price increase was almost half, and 682 new outlets were added last year.

Gross margin of sports and clothing business increased by 1.9% compared with last year, 44.5%. This is mainly due to the strong demand of the market, and the stock has been in a tight state. The retail discount rate has been continuously improved and the proportion of new product sales has increased.

JP Morgan issued a neutral rating on BELLE's international performance report.

The report pointed out that after deducting the provision for impairment, BELLE's basic profit fell by 20%, far behind the expected 9% to 10% decline in the bank, mainly due to sales, comprehensive and administrative expenses and tax expenditures exceeding expectations.

The company's chief executive, Sheng Bai Chai, said at the annual performance conference that the decline in performance was mainly due to the huge changes in consumer demand for shoe categories. Consumers began to pay attention to cost performance, convenience and personalization. At the same time, it was pointed out that the emergence of electricity providers posed a great threat to the group. He felt very guilty about the first time that profits fell in the nine years since the listing of the company.

He added that the decline in the income of footwear business in the second half of the year was more serious than that in the first half of the year, resulting in a decrease of 8.5% to 21 billion 100 million yuan in the whole year. Even if the income in sports and clothing business increased by 16.2% to 19 billion 700 million yuan, it would still be unable to compensate for the decline in footwear business income.

He admits that the performance of the group is unlikely to be reversed in the foreseeable one to two years, so the group is considering whether there is a need to make a pition. At the same time, it points out that the group will only die slowly if it does not pform, but if fundamental changes are made, it will face great risks and speed up the decline of performance.

As to when there will be a pformation decision, he said that the key to making decisions as soon as possible lies in whether he can make changes in his mind.

For the Hongkong market, BELLE said that Hongkong stores still recorded profits, and that sales performance was related to the overall retail environment of Hongkong. In the future, the number of stores will be adjusted according to the operating environment and rents, and it is emphasized that Hongkong business will not be ended.

JP Morgan expected the market to react negatively to the company's disappointing performance. It also pointed out that the most important problem for the company is the lack of feasible strategies in the footwear business, especially in the face of the drop in passenger flow of 100 loan companies, the interference of low price of electricity providers and the serious challenge of the Internet to its brands.

According to public information, BELLE will try to enter the water.

The Barok project, which was invested 2 years ago, has made progress. Last year, the group said that the sales volume, profitability and operational efficiency of Barok's business in China were significantly improved.

In addition, BELLE and Italy REPLAY brand reached a strategic cooperation agreement, responsible for developing REPLAY brand in Greater China business.

In the past two years, REPLAY has started to carry out relatively large product upgrading and business pformation. With its innovative products like Hyperflex super brand jeans and internationally renowned spokesperson resources, market position has rebounded and competitiveness has been improved.

BELLE said that through cooperation with the REPLAY brand, it can help the group effectively cut into the growing jeans market.

After BELLE's annual earnings report, the company's stock dropped 0.421% today to HK $4.73 per share, with a market value of HK $39 billion 900 million.