* Total revenue rises 2 pct, sportswear outpaces footwear
* Gross profit margin down at 54.3 pct vs 56.3 pct
* Private equity firms offer HK$6.30 apiece to buy out Belle
(Adds CEO's comments from briefing)
By Donny Kwok
HONG KONG, May 16 Chinese shoe retailer Belle
International Holdings posted an 18 percent drop in
its annual profit on heightened competition from e-commerce,
likely bolstering the chances of success for a $6.8 billion
buyout offer targeting the firm.
A consortium led by private equity firms Hillhouse Capital
Group and CDH Investments offered in April to buy Belle, which
distributes several sportswear brands including Nike, Adidas,
Puma and Converse. Belle directors Yu Wu and Sheng Fang were
part of the consortium, in what could be one of Asia's largest
Belle Chief Executive Sheng Baijiao and chairman Tang Yiu
have accepted the offer for their combined 25.8 percent stake.
Sheng also hailed the take-private plan, saying Belle needed a
"fundamental transformation" which could be implemented more
effectively if the company is free from "short-term distractions
arising from the public equities".
"I accepted the privatisation as it gives myself and the
company a way out," Sheng told a results briefing on Tuesday.
Belle has said it is experiencing "unprecedented challenges"
from e-commerce and shopping malls that compete with its main
sales channels in department stores.
UBS said in a research note the fundamentals of Belle's
footwear network continued to deteriorate on falling sales and
foot traffic, and investors were likely to accept the offer.
Belle, which hopes to boost its e-commerce presence as
Chinese consumers increasingly shop online, posted a fall in net
profit to 2.40 billion yuan ($348 million) for the year ended in
February, its lowest in nine years.
The company had warned in March of a 15 percent to 25
percent drop in annual profit.
Overall revenues rose 2 percent to 41.7 billion yuan, helped
by a 15.4 percent jump in the revenues of the sportswear and
apparel business, its No.1 business now.
But revenue at its footwear business slid 10 percent and the
business accounted for 45.5 percent of total revenue, down from
51.7 percent level a year ago.
Belle said its footwear business is facing tough challenges
due to changing patterns of foot traffic in retail channels and
shifting style preferences of consumers.
Its gross profit margin declined to 54.3 percent from 56.3
percent a year ago.
The company directly managed 20,716 retail outlets in China
at end-February, including 13,062 footwear and 7,654 sportswear
and apparel outlets. It operated 20,873 outlets a year ago.
Belle's Hong Kong-listed shares, which lost 25 percent of
its value in 2016, are up 39.5 percent so far this year. That
compared to a 15.1 percent rise in the benchmark index.
($1 = 6.8905 Chinese yuan renminbi)
(Reporting by Donny Kwok and Lee Chyen Yee; Editing by