Belle Drops After Investor Said to Sell $129 Million Holding

Belle International Holdings Ltd. (1880), China’s biggest shoe retailer, tumbled the most in more than six weeks in Hong Kong trading after an investor was said to have sold HK$1 billion ($129 million) of shares.

Belle slid 6.6 percent, the biggest drop since Oct. 18, to HK$14.22 at close. The shareholder sold 70 million shares at HK$14.60 each, the high end of the proposed price range, said the people, who declined to be identified as the transaction is private. The deal was increased from 50 million shares.

Today’s decline, the biggest on the MSCI Asia-Pacific Index, pared Belle’s gain this year to 7.8 percent, compared with a 15 percent slide for the regional benchmark. The management of the Hong Kong-based company with more than 13,000 stores in China in September sold about 2.85 percent of the retailer’s shares at HK$15.28 each.

“Investors are selling shares to lock in profits as a lot of investment companies are trying to increase cash holdings near the end of the year,” said Ray Sze, a director at Tianda Securities Ltd. “The share sale doesn’t signify a slowdown in the company’s growth outlook. Belle is still pretty solid in term of sales and earnings.”

Stock Recommendations

The seller of shoes and clothing under brands that include Joy & Peace and Staccato will probably boost profit this year by 26 percent to 4.3 billion yuan ($677 million), according to the average of 17 analysts’ estimates compiled by Bloomberg. Twenty- four of 29 analysts who cover the stock recommend buying it.

Net income for the company, which gets about 95 percent of sales from China, increased 29 percent to 2 billion yuan in the first six months of the year. The profit margin widened to 14.4 percent from 13.9 percent a year earlier on an increase in the portion of sales from the more profitable footwear business.

Higher wages and material costs may narrow its margin, Belle said in its earnings statement in August. Wages may rise “sharply” in the next two to three years after climbing 15 to 20 percent in the first half, Chief Executive Officer Sheng Baijiao said Aug. 25.

The company had 98,564 employees at the end of the first half, 23 percent more than a year ago, according to data compiled by Bloomberg.

Belle had more than 13,000 outlets in mainland China and 164 shops in Hong Kong and Macau as of the end of June. Chief Executive Officer Sheng Baijiao in August said the retailer may increase its stores by 15 percent this year.

Morgan Stanley (MS) acted as sole manager for the stock sale, according to a copy of a term sheet for the deal obtained by Bloomberg.

A telephone call made to Belle’s investor relations office wasn’t answered. Executives weren’t immediately available for comment today, according to a spokeswoman who declined to be identified, citing company policy.

To contact the reporters on this story: Zijing Wu in London at zwu17@bloomberg.net; Fox Hu in Hong Kong at fhu7@bloomberg.net

To contact the editors responsible for this story: Frank Longid at flongid@bloomberg.net; Jacqueline Simmons at jackiem@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.