The Transformation Of "Shoe King": From Delisting To Listing, From BELLE To Tai Po

Recently, Tao Bo international has submitted a prospectus to the HKEx to apply for the listing of the main board.

When it comes to Tao Bo international, perhaps many people are not familiar with it, but behind it, the "shoe king" BELLE has long been well known to the Chinese people. As a generation of "shoe king", BELLE has been the "shoe buying" of domestic girls for a long time. In this regard, BELLE international CEO Sheng Bai Chai also once heroic said, "every woman passing by, must have BELLE."

However, when the new retail business swept the domestic business circle, BELLE began to lag behind the times. Under the influence of multiple factors such as the shoe market downturn and the failure of the electricity supplier transformation, the former king is declining. What is even more alarming is that in July 27, 2017, BELLE International announced its privatization delisting. When the market was withdrawn, the valuation of the company was only HK $53 billion 100 million, which shrank by 2/3 compared with its peak market value of HK $150 billion. Only when the market thinks "shoe king falls", BELLE international operates under the operation of high allocating capital, and splits the subsidiary company to fight back to the Hong Kong stock market.

It is the sports brand agency business of BELLE international before its sports split. According to the prospectus, after the split, there were 8343 Direct stores and 1088 downstream retailers operated by 1880 stores in 2018. In the company's direct store, 98.8% is a single brand store, in addition to operating a few brand stores through Topsports and Foss brands. From the perspective of market share, Tao Po sports occupies 15.9% of the domestic sports shoes market, ranking first in the industry, exceeding the total share of the 15.2% four companies.

Judging from the business situation, the company's stores include many international brands including Nike Nike, Adidas Adidas, Puma Puma, Converse CONVERSE, Timberland Tim Bai Lan, Vans van se, The North Face north, Columbia Columbia, Asics and many other brands.

Among them, Nike and Adidas are the main brands of the company's agents. The two main brands accounted for 90%, 89.4% and 87.4% of the company's revenue in the past three fiscal years. As of February 2019, the main brand operated 6383 single brand stores in China.

It is precisely because of the many well-known international sports brands, with the recent years of health and sports swept the country, the performance of the sports competition is also rising to a good industry situation.

Data show that in the 2017-2019 fiscal year, the total business revenue of Tao Bo was 21 billion 690 million yuan, 26 billion 549 million yuan and 32 billion 564 million yuan respectively. In the 2018-2019 fiscal year, the company's revenue grew by 22.7%, much higher than 11.1% of the industry average. At the same time, the net profit of the company in the same period was 1 billion 538 million yuan, 1 billion 810 million yuan and 2 billion 237 million yuan respectively, which means that in the 2018-2019 fiscal year, the company's net profit increased by 23.6%, and realized the synchronous growth of the net profit of the revenue.

As the main business of the company is the domestic agent of many international sports brands, and Nike and Adidas are their two main brands, the development of these two brands in China is related to the international performance level.

Recently, Nike released its annual report for fiscal 2019 as of May 31st this year. According to the results of the report, Nike's Greater China revenue for the first time in fiscal year 2019 broke through the US $6 billion mark, reaching US $6 billion 208 million, increasing 24% over the same period on the basis of exchange rate unchanged. Prior to the announcement of its quarterly report in 2019, Adidas also said that Adidas's Greater China sales achieved double-digit growth of 16%.

From the stock turnover of Tao Po sports, we can see that the company's stock increased from 4 billion 154 million yuan in fiscal year 2017 to 6 billion 139 million yuan in fiscal year 2019, but the inventory turnover time of the company decreased from 103.6 days in fiscal 2017 to 103.5 days in the 2019 fiscal year. This reflects the current situation of the company's market sales is still relatively strong.

Moreover, from the company's cash flow situation, in the 20117-2019 fiscal year, the net cash flow of sports activities of Tao Po sports is higher than its current net profit level, which reflects the company's good cash earning ability and cash flow status.

However, although the company's performance and financial performance is better, it does not mean that there is no potential risk. As an agent company, Tao Po sports not only needs to maintain good relations with upstream suppliers, but also needs to work well with the sales channels of downstream stores.

In recent years, due to the rapid development of online e-commerce in China, to a certain extent, it has affected the business of offline shopping malls. Therefore, there is a phenomenon of "pressure payment" which appears in some stores under the consideration of their own financial performance.

Judging from the age of accounts receivable, the company still has an increase in accounts receivable in 31-60 days and over 90 days in 20119 years, which is worth investors' attention.

In addition, the company now relies heavily on Nike and Adidas's two main brands, and these two brands once occupied 90% of the company's main revenue, although in recent three years, the company has acquired many sports trend cards to optimize the company's business structure, but for example, The North Face, Asics and other brand performance and less than market expectations. This also means that once Nike and Adidas's two brands are blocked, their sports performance will be greatly affected.

However, from an investment standpoint, although BELLE international shoes sales have not performed well in recent years, the sports brand is still one of its few high-quality assets under the background of the rapid growth of the domestic sports industry. And under the operation of high allocating capital, it has begun to actively promote digital transformation and develop towards smart retailing. It can be seen that the future development of the company is still worth looking forward to.