Will BELLE Seed Return To Its Capital Market Subsidiary?

After two years, BELLE, a privatized shoe prince, will return to the capital market.

At the end of June, BELLE, a subsidiary of its sports business, offered a prospectus to the HKEx for listing.

According to Bloomberg report, the peak campaign program raised a maximum of $1 billion.

Relying on selling international sports brands such as Nike and Adidas, Tao Po sports has become China's largest sporting goods retailer. In the 2018 fiscal year, its sales amounted to 32 billion 560 million yuan, far more than Anta's 24 billion 100 million yuan, and its annual profit was the first time to exceed 2 billion yuan.

Nearly 9 of the revenues from Tao Po sports come from Nike and Adidas. The cooperative relationship between Nike and Adidas lasted 20 years and 15 years respectively.

In addition, it has mastered the distribution rights of 9 brands such as Puma, Converse, Timberland, Vans, The North Face, Asics, OnitsukaTiger, Reebok, Skechers and so on in the Chinese mainland market. It can be said that as long as most people can name the sports brand, they can buy it in the sport of fighting.

At present, there are more than 8300 Direct stores in the country, attracting more than 2 million passengers per day. And 99% of stores are single brand stores, which use Nike, ADI and other sports brands instead of the name of the sport.

Of course, there are also shops named "Topsports" and "Foss", but they are few in number and generally known.

Members hold up half the sky.

Before BELLE's delisting, 55% of its sales came from sports and clothing business. What improvement has it made?

In May 2018, the "TopFans" member program was launched to provide members with discount and free professional sports shoes and free courier services. In addition, some partners also provided free sports training courses to members.

Besides, the new retail store has been upgraded to create a consumer community on the line. Store shopping guide will invite customers to join interest groups, provide customers with one to one services, release new products online, attract customers to participate in line trial activities.

This series of improvements will substantially improve the company's performance. The prospectus shows that in the 2016-2018 fiscal year, the business revenue of Tao Po sports was RMB 21 billion 690 million yuan, 26 billion 550 million yuan and 32 billion 560 million yuan respectively, and the adjusted annual profits were 1 billion 540 million yuan, 1 billion 810 million yuan and 2 billion 240 million yuan respectively. Both revenue and profit grew by more than 20%.

Among them, the membership plan has a huge contribution to revenue. According to the prospectus, by the end of February this year, the proportion of sales contributed by members to total sales has increased from 29% to 52%.

In order to be more close to young people, Tao Po sports also entered the competition industry. For example, it won the first prize in the League of Champions League LPL competition, and also set up its own E-sports club TopsportsGaming.

The advantages of multi-channel and omnidirectional service members have become the characteristics of the fighting sports, and can hardly be broken by competitors in a short time.

Behind the re listing: high leverage capital

It is high allocating capital to promote the stock market to be listed separately.

High allocating capital is the golden father behind many Internet Co. After the establishment of high leverage capital in 2005, Zhang Lei invested the first investment in Tencent. Dipoint, Jingdong, Iqiyi and so on have all received investment from high allocations capital.

In April 2017, Gao Ling capital and CDH investment captured BELLE international for $6 billion 800 million and shocked the industry. At that time, the transaction volume of privatization of BELLE international broke the record of the privatization of HKEx. More people are wondering why this investment organization will see a company that has been declining for a long time.

Founded in 1991, BELLE is the largest female shoe retailer in the world. It has more than 20 thousand stores in the world. It is also known as the "shoe king". It has 18 brands, including Belle (BELLE), Teenmix (Teenmix), Tata (HERS), Staccato (Staccato), Joy&Peace (Zhen Meishi), Millie s (Miao Li), etc.

In 2011, BELLE established the vertical website purchase network, but the effect was not satisfactory. In the 2014-2016 fiscal year, BELLE's performance declines linearly, and revenue growth declines significantly. It increased by 8.74%, 1.95% and 2.21% compared with the same period last year. The profit also began to grow negatively from the 2015 fiscal year, and was eventually acquired, and it was delisted in July 2017.

In the declining trend, only BELLE agency's sports and clothing business grew faster, accounting for 55% of revenue. But BELLE did not grasp the production supply chain, the gross margin was only 44%, and the gross margin of footwear 67% was significantly lower.

And the high leverage capital is BELLE's complete industrial chain, which is different from the practice of many shoe companies outsourced production. BELLE's producers, channels and supply chains are integrated. High leverage capital acquired BELLE, and intends to revitalize it with modern means. For example, the use of the Internet to increase consumer demand for their products, and use 3D printing technology to customize shoes.

After the completion of the acquisition, Zhang Lei spoke at Yabuli Chinese entrepreneurs forum that the high allocating capital has solved the problem of BELLE inventory, resulting in a substantial reduction in discounts. "We just made a simple informationalization, and put the information of consumers' real-time trial and dress into the factory directly, instead of waiting until the end of the quarter to discount this thing."

The transformation of BELLE from high altitude capital is still in progress, but the challenges facing the upcoming market are still unresolved.

Revenue is heavily dependent on Nike and Adi, and challenges remain after listing.

According to the report of Frost &Sullivan (Sullivan), China's sports apparel retailer ranks first in the market, with a market share of 15.9%.

A strong competitor is Baosheng international, a Hong Kong stock listed. Although Baosheng International's revenue is not as good as its sport, its controlling shareholder Yuyuan is an OEM company of Nike and ADI. Its channel advantage is obvious.

And nearly 9 of the revenues from Nike are from Nike and ADI.

Therefore, once Nike and Adi do not renew their contract with the sport, or Nike and Adi are no longer welcome by consumers, the performance of the sport will be implicated.

Take precautions to avoid crises. Increasing cooperation with domestic brands and building new brands of domestic goods can be considered.

On the whole, the present environment is still promising for sports retailers and manufacturers.

According to the total retail sales in 2018, China has become the second largest sports shoe and apparel retail market in the world after the United States.

People have more and more health consciousness, the sports craze is not reduced, coupled with the state's attention to sports, the rapid development of sports shoes and clothing industry will continue.