After the privatization of BELLE shoes was delisted, after two years, IPO was reorganized in the way of splitting sports business.
BELLE's "Tao Bo International Holdings Limited" (hereinafter referred to as "Tao Bo international") has submitted a listing application at the HKEx recently. It was approved in September 6th. It is estimated that the IPO will raise 1 billion US dollars.
Tao Po international has been involved in sports shoes and clothing since 90s. In 2004, it was the largest retail partner of Nike in China. In 2006, it was independently operated by BELLE as a group.
Prospectus shows that Tao Bo international revenue in 2018 was 32 billion 564 million yuan, adjusted annual profit of 2 billion 236 million yuan, an increase of about 24% over the same period last year. In terms of sales volume, Tao Bo occupies the 15.9% share of China's sports footwear market, ranking first in the industry, including the distribution rights of 17 international sports brands including Nike, ADI, CONVERSE, North and Columbia.
Can BELLE make a comeback?
Backed by Nike, ADI
In 2017, due to poor performance, BELLE accepted a consortium composed of high leverage capital and CDH investment, which completed its privatization at HK $6.3 per share and HK $45 billion 300 million (US $6 billion 800 million).
Apart from the international listing of sports sector, BELLE has the bottom line. Earnings before the delisting showed that BELLE's sports and clothing business revenue increased by 15.4% to 22 billion 746 million 500 thousand yuan, exceeding the performance of 18 billion 960 million yuan in traditional shoes. Over the past two years, it has maintained an increase of more than 20%.
At home, there are 8343 direct outlets (including 8281 single brand stores and 80 multi brand stores), and 1880 stores run by downstream retailers in the whole country, covering nearly 270 cities across the country. Business is highly penetrated into the market, and the average sales volume of the outlets is 3 million 700 thousand yuan / year.
As the largest dealer in Nike and ADI in China, the sales revenue of Tai Po international is mainly contributed by these two main brands. 6608 of the 8281 single brand stores operated by them belong to Nike and Adi stores. From 2016 to 2018, the sales revenue of the two brands accounted for 90%, 89.4% and 87.4% of the total sales respectively.
Relying solely on the two main brands to support the performance, so that Bo Bo international market in the market is slightly passive, it also expressed concern in the prospectus, "relying on a few brand partners to provide sales products, once it can not maintain good relations with them or fail to renew the retail agreement, the company's profitability and business prospects will have a significant adverse impact."
However, for the relationship between the two sides, it will not change for the time being. Tao Bo international has maintained 20 and 15 years of cooperation with Nike and Adi respectively. In the context of international sports brand sales increasingly relying on the Chinese market, with the help of the international network of stores, it should be the best choice for brands to consolidate the Chinese market.
In order to ease the dependence on Nike and ADI's performance, in recent years, Tao Bo international has been improving its brand structure by increasing its popularity. In 2018, sales of non major brands increased by 46.5% to 4 billion 77 million yuan over the previous year, but it can not compete with the two main brands.
The dilemma of middlemen
As a middleman, Tao Bo international is only responsible for the sales link, inventory digestion is restricted by the upstream and downstream retailers, brand control is weak, mainly low profit and large-scale operation strategy.
The listing path of Tao Bo is the same as that of 03813.HK, another domestic sports brand agent. Baosheng international is a Hong Kong stock listed company Yuyuan group, which has been split up and sold mainly to Nike, ADI, Puma and other brand sports shoes and apparel. It went to Hong Kong in 2008. Its market value is nearly 11 billion 400 million yuan. In 2018, its revenue reached 22 billion 677 million yuan, and its net profit was 543 million yuan.
In the past three years, the international gross profit margin has been stabilized at around 41%. Taking 2018 as an example, its gross profit is 13 billion 607 million yuan and net profit is 2 billion 236 million yuan. Competitor Baosheng international gross margin is about 35%.
The high inventory problem of sports brands has also brought potential risks to earnings. From 2017 to February 2019, the number of inventory turnover days was stable for about 103 days, but the stock size increased from 4 billion 154 million yuan to 6 billion 139 million yuan.
In order to enhance the profitability of single stores, in the past three years, Tao Bo has shut down 3133 stores with poor performance, relocating 4492 new outlets and optimizing the store network. The digital transformation strategy has also brought new potential for growth. It has about 18 million 200 thousand registered members, and its contribution to total retail sales has increased to 52.3% now.
In order to attract more young consumers, since 2017, Tao Bo international has been involved in virtual sports competition, set up an electric competition club, won the LPL seat of the League of heroes, and participated in the popular games such as the Royal glory and Jedi survival.
According to the Research Report of Ou Rui International, in 2018, the scale of China's sports shoes and clothing market reached 280 billion yuan, an increase of 19.5% over the same period last year. It is expected that the compound growth rate will exceed 9% over the next five years, and the market size will exceed 450 billion yuan by 2023.
Benefiting from the rising consumer awareness of fitness, Nike, ADI, Puma and other brands have been climbing steadily in China. Seize the momentum of rapid growth of the industry, after the successful listing of Tao Bo international, it may be possible to recreate a new "shoe king".
Source: twenty-first Century Business Review Author: Li Huilin