Belle International overcame consumer uncertainties in the Chinese market to lift its sales by 22.1 percent to 28,945 million renminbi (€3,450m-$4,569m) last year, with particularly robust expansion in its footwear unit. The growth was aided by increases in average selling prices, as well as store openings and comparable sales growth.
On the footwear side, Belle's turnover increased by 26.5 percent to RMB 18,533 million (€2,209m-$2,925m) for the year. The company's sales of its own footwear brands - from Belle to Senda, Staccato, Basto, Mirabell and several others - jumped by 24.9 percent to RMB 16,714 million (€1,992m-$2,638m). For these brands, the group adopts a vertically integrated business model that covers R&D, manufacturing, distribution and retailing.
Meanwhile, Belle's sales of footwear brands for which it handles only the distribution in China, such as Bata, Geox, Clarks and Merrell, among others, inflated by 46.1 percent to RMB 1,526 million (€181.9m-$240.9m).
Belle reported comparable sales growth of 15 percent for its footwear stores, as increases in the costs of raw materials and wages pushed up average selling prices. The cost hikes were well-absorbed by consumers, apparently not affecting volumes.
At the same time, Belle added 1,958 footwear stores in mainland China, which was an increase of 23.6 percent. By the end of last year, Belle owned and managed 10,270 footwear stores, including 9,317 stores under its own brands and 953 stores for brands under distribution deals.
Belle pointed out that higher average spending power and other consumer trends strongly favored sales of established, medium-priced brands like Belle. That brand alone added 300 stores to its network last year, adding coverage in more than 40 cities.
On the sportswear side, Belle's sales climbed by 15.0 percent to RMB 10,412 million (€1,241m-$1,643m). Just as in the footwear business, consumer trends favored the most established brands, Nike and Adidas: Belle's stores for these first-tier brands saw their sales increase by 16.3 percent to RMB 9,075.5 million (€1,082m-$1,432m), while the increase reached 7.0 percent to RMB 1,229.2 million (€146.5m-$194.0m) for the secondary brands.
The company expanded its number of sports stores by 28.0 percent to 4,680 sports stores, an increase of 1,025 stores, with more than 30 cities and 200 department stores added. The network includes 3,602 stores for first-tier brands, and 1,073 stores for secondary brands such as Kappa, Puma, Converse and Mizuno.
However, Belle pointed out that Chinese sports retailers were coming under heightened pressure. This is partly due to increasing competition from casual apparel brands, which are starting to swamp the Chinese market, while sports footwear is less affected. The group is reacting by investing in the productivity of its sports stores, and encouraging suppliers such as Adidas and Nike to invest more in differentiating their product offering – particularly putting more emphasis on technology. Belle has also starting investing in multi-brand formats.
Another consequence of the pressure in the market is increased concentration, as some of the smaller players lack capital and managerial resources to deal with the current development. Along with Pou Sheng, its leading rival in the sports retail market, Belle itself has strongly contributed to the concentration in the business. It announced earlier this week that it was paying RMB 880 million (€104.9m-$138.9m) to acquire Big Step, a company that runs about 600 sportswear stores around the country that sell mainly Adidas and Nike products.
The company warned that more changes were required to improve the structure of the sports retail market. These changes would have to be driven by the market leaders, and they would cause added pressure and disruption in the short term. Yet Belle was still upbeat about the prospects of the market in the longer term, as it continues to explore the potential of smaller cities (more on this and on the Chinese sports retail market in SGI Europe).
Belle lifted its gross profit margin by 1.5 percent to 57.2 percent for the year. The improvement was attributed to higher selling prices, as well as consistent moves to make the group's supply chain and distribution structure more efficient – with particular benefits for the emerging brands in its footwear offering. On the other hand, it did suffer from rising wages, with average increases of 15 percent for front-line workers and sales associates for each of the last two years.
Belle achieved a gross profit margin of 68.8 percent in its footwear business, up by 0.8 percentage points, while the group's gross margin reached just 36.6 percent for its sports stores, up by 0.7 percentage points. It achieved an operating profit of RMB 5,265 million (€627.6m-$831.0m), amounting to an operating profit margin of 18.2 percent, up by 1.5 percentage points compared with 2010. The group's net profit landed at RMB 4,238 million (€505.2m-$668.9m), up by 23.8 percent.
As part of its investments for the coming years, Belle wants to expand its price range in the women's fashion footwear market, with a stronger emphasis on mass market brands. For this purpose, a first batch of fast fashion footwear stores was launched with the 15mins banner last month, and Belle plans to add another 100 of these stores within the next year.
Meanwhile, the company has also been widening its ranges of men's footwear, which now make up about 15 percent of the sales of the Belle brand. It also decided to move into the children's footwear market, which is vastly underdeveloped in China. This initiative is in the early stages, with the development of children's footwear under company-owned brands.
A fourth area of investment is online retailing, with the launch of the yougou.com platform last July. Belle said it was already consistently ranked among the two largest consumer-oriented online sales platforms for footwear in China.