PE-owned Belle Fashion files for Hong Kong IPO

The size of the offering – set to be Hong Kong's largest in the retail space since 2020 – could still change depending on ongoing discussions about market conditions, according to Bloomberg. The company raised USD 1.1bn when it listed in Hong Kong in 2007.

Hillhouse and CDH led a HKD 53.1bn (USD 6.8bn) acquisition in 2017, which was notable among China take-privates in that the existing leadership did not participate. Founder Yiu Tang and CEO Baijao Sheng fully exited their combined 25.75% stake, with Hillhouse and CDH going on to take 56.81% and 12.06% holdings, respectively.

Hillhouse and CDH currently have positions of 44.48% and 9.16%, according to a prospectus. Management holds 46.36%. Minor private equity backers include Vertex Ventures China, which has a 2% stake in Lai Wah Footwear, a wholly-owned subsidiary that targets young women and girls via the 15mins brand.

Belle was founded in Hong Kong in 1981 and expanded into mainland China in 1992. It has a portfolio of 20 brands, including 13 own brands and seven partner brands across various price points. In footwear, mass-market brands include 15mins and Basto, while high-end brands include Skap and UK-based Clarks. High profile apparel brands include US-based Champion and Caterpillar.

Belle spun out its sportswear division, Topsports International, through a USD 1bn Hong Kong in 2019. Hillhouse and Belle management currently hold a combined 55% interest in the business. Topsports’ model differs from Belle in that rather than being a vertically-integrated designer, manufacturer and retailer, its operations are limited to marketing international partner brands.

The spinout was in part motivated by a need for additional resources and expertise to remain competitive. Both the footwear and sportswear segments of the overall business had struggled due to the rise of e-commerce in China reducing foot traffic in malls. Belle had posted 13 consecutive quarters of negative same-store sales growth as of the decision to take Topsports public.

COVID-19 has also exerted significant pressure on Belle in the past two years. As of November, the company had 9,153 directly operated brick-and-mortar stores in China, making it the largest such fashion footwear and apparel retail network in the country, according to Frost & Sullivan. Part of the solution has been to navigate lockdowns by speeding up seasonal product rollouts.

"Everyone is doing Zoom and virtual conferencing wearing pyjamas – who would need dress shoes? In February and March [2020], sales were down more than 90%,” Hillhouse founder Lei Zhang said early in the pandemic. “Today, sales are growing at a double-digit pace. After more than three years of ownership, we have leveraged technology to transform the company to be just-in-time with cloud-based inventory.”

Belle generated revenue of CNY 21.7bn (USD 3.4bn) for the 12 months ended February 2021, up from CNY 20.1bn the prior year. This compares to CNY 32.9bn for the last financial year before the Topsports spinout and CNY 40.8bn for the year preceding to the Hillhouse and CDH investment.

Online was about 7% of revenue in February 2017, versus 25% as of November 2021. Net profit improved 12% during the 2021 financial year to CNY 2.6bn.

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• Topics
• Greater China
• Consumer
• IPO
• China
• Hillhouse Capital Management
• CDH Investments Management