Confirmation of an apparent turnaround in the Chinese market came with a strong performance by Belle International in the six months ended on Aug. 31, but the performance of its own footwear brands was more muted than that of the international brands that it distributes in the country. The regular footwear market was weaker than the sports market.
Belle's footwear business lifted its sales by 6.6 percent to RMB 10,355 million (€1,353.4m-$1,690.4m), with increases of 6.1 percent for its company-owned brands, like Belle or Staccato, and 16.4 percent for distributed brands such as Bata, Clarks, Hush Puppies, Mephisto, Merrell and Caterpillar. Sales of its own brands abroad fell by 7.6 percent and represented only 1.6 percent of the segment's total turnover.
The number of its stores in this segment increased slightly to 13,491. Comparable store sales declined while wage costs continued to increase, but with tight management, the gross profit margin of the footwear business moved up by 0.5 percentage points to 67.7 percent, but the operating margin fell by 0.4 percentage points to 21.0 percent.
The turnover of Belle's sportswear retail business jumped by 16.8 percent to RMB 8,201.1 million (€1,071.9m-$1,338.8m) for the six months. Sales and profit margins for this part of Belle's business both advanced significantly for the six months until the end of August, as the retailer benefitted from a rise of about 15 percent in comparable sales and more support from the owners of the brands sold in its thousands of mono-brand stores.The comparable sales increase was driven by a rise of more than 10 percent in volumes, while average selling prices improved at a low single-digit rate.
About 82 percent of Belle's 6,000-plus sports stores carry the Adidas and Nike brand, while 17 percent are managed for what Belle describes as secondary brands such as Puma, Converse and Mizuno. Sales of Nike and Adidas stores jumped by 15.7 percent, making up about 88 percent of Belle's sportswear business. Meanwhile, sales of second-tier brands advanced by 11.8 percent.
The gross profit margin for the sportswear category climbed by 2.0 percentage points to 41.9 percent for the six months.The group attributed the improvement in the sports segment to less discounting, which is contributing to a normalization of the markdowns in the overall Chinese sports market. It said that destocking had been almost completed, meaning that a larger proportion of sales consisted of new arrivals retailing at better mark-ups. Belle further explained that brand owners provided more subsidies and support to distributors, leading to reduced purchasing costs.
Belle's performance was also aided by a consolidation of the market, meaning that regional and local distributors with fewer resources have exited the business, while larger and more productive distributors have taken larger market shares and received more support from the brands. Belle added that sales of sports brands have been supported by fashion trends, using more athletic designs.
The entire company's turnover expanded by 10.9 percent to RMB 18,556.1 million (€2,425.3m-$3,029.2m) for the six months. With increases on both the footwear and sportswear side, the group's gross profit margin reached 56.3 percent for the period, up by 0.6 percentage points. Belle ended the first half with a 12.7 percent higher operating profit of RMB 2,729.2 million (€356.7m-$445.5m) and net profit of RMB 2,072.9 million (€270.9m-$338.4m), up by 8.3 percent.
Belle has started adjusting its organizational structure for further growth by centralizing some functions like brand management, and at the same time decentralizing retail operations by dividing them into smaller business units and delegating more decisions to city-level management. The retail giant is also investing in information technology and logistic resources on a national scale, to support the stores as well as online retailing. More in SGI Europe