* Fierce competition in store and online weighs on retailers
* Robust sportswear sales to outpace footwear division
* Net profit rose just 1 percent in fiscal year ended Feb
(Adds comment from CEO, earnings outlook details)
By Donny Kwok
HONG KONG, May 27 China's biggest shoe retailer
Belle International Holdings Ltd said it expects
sluggish growth in the world's second-largest economy to weigh
on its earnings for the next two years after profit edged up
just 1 percent in its latest fiscal year.
As fierce competition in stores and online makes life
tougher for China retailers, Belle is counting on robust sales
of popular global sportswear brands like Nike and Adidas
to cushion a more subdued performance by the shoes it
makes itself that still generate most of its profit.
Chief Executive Sheng Baijiao said Belle expects strong
brand recognition to help lift same-store sportswear sales by a
high-single digit percentage this fiscal year, compared with 6
percent last year. Sales at its footwear division, including
affordable in-house brands like Staccato and Tata targeted at
younger Chinese women, should rise by a low single-digit
percentage, compared with 0.6 percent last year.
"We see some improvement in our same-store sales in
March-May quarter as compared to the previous quarter, but
(footwear business) in not out of the woods yet," said Sheng, in
charge of the largest footwear retailer in China by market
Speaking to reporters in Hong Kong, Sheng said the company
may slow down its store opening pace in the current fiscal year
in wake of the weak sentiment.
Retailers like conglomerate China Resources Enterprise
have reported the softer economy is already taking its
toll. Some are locked in price wars that are
slicing into profit margins, while a rapid expansion of
department store space and a surge in online retail have diluted
foot traffic in Chinese stores.
With a network of nearly 20,000 stores strung across China,
Belle reported net profit rose 1 percent to 5.16 billion yuan
($827 million) for the 14 months ended February, compared with
5.11 billion yuan in a comparable 14-month period ended February
Belle, worth $9 billion by market value, changed its
financial year-end date to the end of February from December
earlier this year. For the 14 months revenue at Belle rose 10
percent to 43.06 billion yuan, up from 39.13 billion yuan in the
14 months ended February 2013.
"The macroeconomic outlook for the next two years is not
optimistic," Sheng Baijiao said in a filing to the Hong Kong
bourse late on Monday. "The consumer retail market is expected
to be under continued pressure due to weak consumer sentiment."
Licensed sportswear sales accounted for about 39 percent of
Belle's total revenue. Belle has said that Nike and Adidas -
which together make up 90 percent of the division's sales - have
much better brand recognition in China, as well as a more
extensive product offering, than second-tier clients such as
French retail group Kering SA's Puma sports brand and
Nike's Converse sneakers.
In the footwear division, Sheng said he expects operating
profit margins to remain stable at about 22 to 24 percent.
The business is more profitable than the higher-priced
licensed sportswear sales because Belle can book all revenue and
profit from sales of most of the brands in the footwear unit
itself. The division does include some licensed international
footwear brands, like Hush Puppies and Clarks.
Shares of Belle were down 1.9 percent in Hong Kong, while
the benchmark Hang Seng Index was off 0.04 percent. The
stock, which fell nearly 50 percent last year, has dropped about
9 percent so far this year.
For full statement click: link.reuters.com/wyb69v
($1 = 6.2392 Chinese Yuan)
(Reporting by Donny Kwok; Editing by Anne Marie Roantree and