Belle targets footwear brand in hunt for more mainland growth

PUBLISHED : Tuesday, 28 August, 2007, 12:00am
UPDATED : Tuesday, 28 August, 2007, 12:00am

Belle International Holdings, a shoe and sportswear manufacturer and retailer, is set to acquire another footwear company by the end of this year, following its acquisition of Fila last month.

'We have spotted the target and taken action,' said chief executive Sheng Baijiao who would not disclose the name of the company. With about 4,800 outlets as of the end of June, Belle will focus on the expansion of its footwear division.

'As the Chinese get wealthier, they buy a pair of shoes for work first,' Mr Sheng said. 'But in the long term, they also buy shoes for different occasions, for example, for their leisure time.'

With 933.6 million yuan in net cash capital, the retailer bought the brand name of Fila in the mainland for US$48 million.

It also formed a joint venture, in which the company owns 85 per cent, to promote the brand name in the mainland, Macau and Hong Kong.

But the new acquisition will not contribute significant income to the company for a year or two, Mr Sheng said.

Belle, which sells its own brand of footwear, as well as first-tier brands such as Nike and Adidas, projected that sales of clothes and shoes would grow at 15 per cent nationwide.

In the second half, Belle will open about 600 new retail outlets compared with more than 900 in the first.

The expansion in retail outlets has taken a toll on profit margins. New outlets need time to generate sales and the margins of outlets selling second-tier sports brands such as Reebok, Kappa and LiNing are at just 33 per cent of the first-tier outlets. The gross margin fell 10 percentage points to 51 per cent in the first half.

'The result is not as good as I expected,' said David Li, a retail analyst at First Shanghai Group. The fall in footwear margins was attributable to the poor design of shoes in the first quarter, Mr Li said.

The company, which raised HK$8.68 billion in May, reported that net profit increased to one billion yuan from 415 million yuan a year earlier.