Can BELLE Break Out Of The Dilemma?

The ice and fire are still going on.

The lifeline of the group, the footwear business dominated by self-reliance, has been on the decline. In the 2015 fiscal year, same store sales fell for the four consecutive quarter, while agency oriented sports and clothing business maintained a steady growth. However, under such a decline, BELLE expects annual profits to drop by 35%-45%.

To this end, BELLE has recently become a shareholder in Italy.

Decoration group, and the establishment of a joint venture with the latter responsible for the operation of the brand in the Chinese market, accelerate the expansion of clothing business.

Can BELLE rely on its apparel business to break through in the downturn of the apparel industry?

Fashion Road

In the face of the continued decline in footwear business, BELLE has repeatedly said that it will actively expand new brands and businesses, and fashion category is the main direction of the trial.

fashion

Domain has become the breakthrough point of BELLE.

CDH, the largest shareholder of BELLE International Group, acquired over half of the shareholding in Japan's Baroque fashion group in September 2013. Of them, BELLE acquired 31.96% of the latter's share in the paction volume of 9 billion yen (550 million yuan), and established a joint venture with China in China to develop its business in China.

Baroque fashion group owns many clothing brands including Moussy, Sly, Rodeo Crowns, Shelter, Black and Rienda, among which women's fashion brand Moussy and Sly have been stationed in the Chinese mainland market.

BELLE said that the Baroque group's strong fashion research and development capabilities, brand marketing capabilities and relatively perfect supply chain are valued.

After Baroque and BELLE cooperate, the business in China has changed from deficit to profit.

The deal became the first step in BELLE's involvement in the fashion industry.

Today, BELLE has again launched its goal to target the Fashion Box of Italy leisure apparel group.

As another movement of the group in the fashion industry, BELLE has the same strategy as last time.

BELLE will acquire Fashion Box 29% stake, and the two sides will establish joint venture to manage the development of the latter's brand Replay in China.

Fashion Box owns a number of product lines including Cowboy brand Replay, high-end denim brand We Are Replay and children's wear brand Replay&Sons, etc. it has 5000 sales outlets and 220 retail outlets worldwide.

In 2014, the group's revenue was about 204 million euros, of which 87% came from the international market.

From these two pactions, BELLE tends to choose fashionable clothing brands on the choice, and these brands account for a relatively small proportion in the Chinese market and have great potential for growth.

BELLE said in its earnings report that there is a strong commonality between the fashion business and shoe business in the customer base, which can expand in coordination and help to control market dynamics and consumer preferences.

In the next 3-5 years, the main business will be concentrated in fashion footwear and sports footwear business.

Shoe industry

Behind the expansion of new business is the frustration of BELLE's main business.

In recent years, under the environment of the footwear market downturn, product design and brand aging have made the giants who once occupy the 1/4 share of women's shoes market also can not escape the fate of recession.

BELLE currently has two major businesses: footwear business, sports and apparel.

The footwear business is mainly self operated, including 13 private brands such as Belle, Teenmix and Tata, and 7 proxy brands such as Bata and Clarks.

The sports and clothing business is mainly based on the agency mode, the agency sports brand includes Nike, Adidas, etc. the clothing brand is only Moussy and Sly.

Compared to the sports and clothing business that only involves distribution and retail links, the footwear business of the group adopts the full value chain mode, and its profitability is obviously stronger than that of the former. It has always been the lifeline of the group.

In the first half of fiscal year 2015, the gross profit margins of footwear business and sports and apparel business were 68.3% and 44.7% respectively.

However, footwear business is mainly operated through department stores, and the situation of short passenger flow and low consumption intention is difficult to improve in the short term.

Footwear business growth slowed from 15% in fiscal 2011 to 3.2% in fiscal 2014.

In the 2015 fiscal year, footwear sales in the four quarter also dropped to 16.5%.

BeLLE, the brand of the group, also withdrew from Hongkong market in August 2015.

In the first half of fiscal year 2015, the proportion of footwear business in group revenues fell to 50.8% from 55.9% in the same period last year, almost unchanged from sports and apparel business.

Unlike the shoe business, with the world's two largest sports brand's biggest agent in China, the sales growth of sports and clothing business increased from 13.5% to 17.2% in BELLE from fiscal year 2011 to fiscal 2014.

In the first quarter of fiscal year 2015, the same store sales increased by 12.4%, followed by three quarter growth of about 6%.

In terms of shops, sports and clothing stores remained stable during the period, but footwear stores had increased 1958 from fiscal 2011 to 876 in fiscal 2014.

Although the growth of sports and apparel business offset some of the negative effects of the footwear business, BELLE's overall performance is still affected. The overall sales, opening stores, gross profit and other data of the group are declining, from 2011 fiscal year to 2014 fiscal year, the sales increased by 22.1%, 13.5%, 10.1% and 8.7% over the same period last year.

The group recently issued a profit warning and expects net profit in fiscal year 2015 to fall by 35%-45%, mainly due to the sluggish shoe business.

Channel change

The importance of channels to shoes and clothing enterprises is self-evident.

As a domestic retail giant, BELLE has also been changing channels in recent years.

As of February 29, 2016, BELLE had 20873 direct outlets in China, including 13762 footwear stores, 7111 sports and clothing stores.

Group footwear business and sports, clothing business revenue share of the shift is also reflected in the expansion of stores.

In the first half of fiscal year 2015, the group closed 424 stores, but at the same time sports and clothing stores were accelerating.

In the second half of fiscal year 2015, the group added 645 stores, of which 587 were sporting and clothing stores.

In addition to the huge offline network, BELLE also earlier involved the electricity supplier.

But unlike ordinary enterprises, BELLE is targeting the B2C market of vertical footwear.

Before and after 2010, the B2C business development of good shoe, shoe store and other shoes was thrived.

Against this background, BELLE invested in the establishment of the best purchase network in July 2011, mainly selling BELLE's series of brand products (including agent brand). The group plans to invest $250 million in the next 3-5 years for the excellent purchase network.

However, vertical shoe B2C electricity supplier has not appeared mature profit mode, many platforms are no longer in sight.

In contrast, the excellent purchase network relies on the backing of BELLE, opening "going BELLE", pforming fashion shoes and clothing department stores, and gradually through the most difficult period.

Although BELLE did not mention the excellent purchase network in its earnings report, the head of the purchase network said that by the end of 2014, the excellent purchase network had basically achieved breakeven and began to make profits in 2015.

The official disclosed that the excellent purchase network will vigorously develop sports industry and fashion industry in 2016, and expand cross-border e-commerce business.

According to independent garment analyst Ma Gang, the huge sales network under the online and offline is the core advantage of BELLE.

BELLE has been expanding through continuous acquisitions. Now, based on a strong retail network, it is expanding the product line through acquisitions and extending the product line in order to achieve liquidity.

At the same time, BELLE invested heavily in the purchase of excellent network in 2015 has achieved profitability, the platform will also be the focus of BELLE's strategic development in the future.

Ma Gang predicts that BELLE will continue to acquire some clothing brands in the future.

Way to break through

The recession in the shoe market is not just about BELLE.

Daphne, Saturday and other domestic women's shoe giants are generally not very well off.

In the first half of 2015, Daphne's revenue fell 13.9% to HK $4 billion 374 million, and net profit plunged 98.5% to HK $2 million 500 thousand.

On Saturday, 2015 revenue fell 7.94% to 1 billion 619 million yuan, and profits fell 27.67% to 38 million 550 thousand yuan over the same period.

A large number of stores have become the choices that these brands have no choice.

In Yang Dayun, President of the excellent international fashion brand investment company, it seems that the market saturation of women's shoes is a cyclical change in the market. Under the background of overcapacity of shoes, the replication mode simply relying on store expansion has been unable to adapt to the market changes.

Compared with other enterprises, BELLE is undoubtedly the most promising breakthrough.

On the one hand, BELLE is strong in scale and capital, and more importantly, BELLE has grasped the draught of the current sports economy.

In the bottleneck of footwear business, BELLE was rewarded by sports apparel business.

It is worth noting that there is also a ceiling in the sports market. Therefore, BELLE needs to develop the fashion business associated with footwear to drive each other, and the rich product line will help to cope with more market changes in the future.

But Yang dyun also pointed out that clothing business for BELLE is a long line business, in the short term can not receive a significant effect.

Whether it was the Baroque fashion group that had been acquired or the Fashion Box group it acquired, its business in China is very small, and the driving force for BELLE shoe business is also limited.

Take Fashion Box Cowboy brand Replay as an example, the market share is very small. Compared with Levi's, LEE and G-STAR, there is a big gap in popularity, influence and market share.

According to the analysis, shoe business is always the core business of BELLE. The layout of apparel business is also to promote the development of shoe business.

Subject to the identity of agents, the role of sports business in improving group performance is limited. In order to achieve overall performance improvement, BELLE still needs to expand its shoe business in the future.