Hongguo International of Singapore has purchased Jiangsu Unity Corporation for 32 million renminbi (€3.2m-$3.9m). JUC operates 50 retail outlets selling fashion apparel in department stores and stand-alone boutiques across three coastal provinces of China. The acquisition will allow the Asian shoe company to move into the complementary sector of branded apparel. Hongguo also thinks the purchase will give it leverage when negotiating retail space leasing and promotional events with department store owners. The group, which is a major subcontractor of Nine West Group, does not plan to reduce its contract manufacturing.

JUC carries apparel by brands including U2, G2000 and Boss, and provides retail management services to international brand boutiques including Byford, Bodyline and Ermenegildo Zegna. JUC’s turnover last year was CNY30 million.

Hongguo’s sales for the six months ended June 30 rose by 27.4 percent to CNY148.8 million (€15.0m-$18.0m), and net earnings increased 35.7 percent to CNY21.7 million (€2.2m-$2.6m). Revenues from contract manufacturing rose by 32.3 percent to CNY26.6 million (€2.6m-$3.2m)with more than two-thirds coming from overseas, mainly the USA. The number of proprietary outlets increased from 249 to 290, and sales there went up 26.1 percent to CNY115.1 million (€11.4m-$14m). Including franchises, the total door count stands at 385 versus 312.

The gross margin improved to 35.8 percent from 32.4 percent due to higher manufacturing margins, which improved to 29.1 percent from 23.4 percent thanks to improved production efficiencies, and because of higher average selling prices. The higher ASPs reflected the growing strength of Hongguo’s own C.banner brand, although the group opened 23 outlets with the lower-priced E.blan line for smaller cities during the period. Inventories by rose 24.2 percent to CNY114.4 million because of the increase in total outlets and the E.blan launch.