Chinese Coatmaker Bosideng Close to Buying U.K. Apparel Chain
Stock Chart for Bosideng International Holdings Ltd (3998)
Bosideng International Holdings Ltd. (3998), the Chinese coatmaker that runs a store in London’s West End, said it is close to buying a U.K. chain and has met with European luxury companies as it seeks deals on the continent.
Bosideng is close to acquiring an 80-store apparel chain in England to sell its down jackets, and is also in early talks with European high-end coat brands about making a possible acquisition, Julie Sun, the company’s vice-president for corporate strategy and investor relations, said in a Sept. 24 interview.
The Hong Kong-listed coatmaker, which sells down jackets and winter coats under brands such as Bosideng and Snow Flying on the mainland, is pushing to build a European presence to boost its image at home and increase sales outside China. Close to a third of Chinese luxury buyers will shop in Europe in 2013, up from a fifth last year, according to McKinsey & Co.
“The majority of Chinese consumers still prefer Western brands and products over local ones,” Sun said. “With so many Chinese traveling abroad, if they go to New York’s Fifth Avenue, Paris, Milan and they see your store, it would help your sales and help brand recognition.”
The acquisition of the U.K. chain, which is privately owned and currently loss-making, will likely be completed by the end of next month, Sun said. Bosideng will pay a minimal sum for the chain, she said, declining to specify the amount.
Chinese fashion brands heading overseas face challenges such as limited brand awareness and fierce competition from domestic brands there, said Doreen Wang, Beijing-based head of client solutions at Millward Brown China, which runs annual brand surveys in the Asian nation.
“They need to invest in the long term and establish visibility,” Wang said.
Bosideng, run by chairman Gao Dekang, invested 300 million yuan ($49 million) to open a flagship store last year at a six-story property on London’s South Molton Street. The company hired British designers Nick Holland and Ash Gangotra, and sells formal shirts for 90 pounds ($145) made with Italian fabric and down jackets for 160 pounds in its London store. In July, the company signed a sponsorship deal with English Premier League Club Tottenham Hotspur.
The Chinese coatmaker had 13,009 down-jacket retail outlets as of March 31 and calls itself China’s top-selling down-jacket brand. It is separately looking into a possible European acquisition or partnership to help it enter the luxury jacket market, Sun said.
It is searching for a high-end European coat maker with global recognition and is open to working through a licensing deal or joint venture, the executive said.
The company is working with investment bankers now and has met with three European coat makers during a recent trip to the region, she said.
“Bosideng is well-positioned in China in the mid- to low-end market,” Sun said. “But for the growing population of the middle class, they moved to other higher brands to pursue lifestyle. We need to get a foothold in this sector to improve our profit margin.”
Bosideng and domestic rivals have faced weakening economic growth on the mainland, where the economy expanded 7.5 percent in the second quarter from a year earlier in its second straight deceleration.
China’s slowing economic growth, trends such as online shopping and the entrance of new foreign fast-fashion brands weighed on the nation’s apparel industry, Bosideng said in a June 26 earnings statement. The company’s shares plunged a day later after it reported net income for the year ending March 31 fell 25 percent from a year earlier to 1.08 billion yuan. The stock is down 23 percent this year, compared with a 2 percent gain for the benchmark Hang Seng Index.
Other Chinese companies have also made overseas acquisitions in luxury retail. Fosun International Ltd. (656), the investment arm of China’s biggest closely held industrial group, has agreed to buy a stake in Raffaele Caruso SpA, an Italian maker of suits for companies including Christian Dior SA. (CDI) The purchase of 35 percent of Caruso through a capital increase will be completed this month, the clothier’s Chief Executive Officer Umberto Angeloni said in a Sept. 6 interview.
Bosideng has built a strong brand in outerwear, has a unique design and invested in technology to improve its products, Millward Brown’s Wang said. “It’s early stages, but if they continue the efforts that they are doing, they will have the best chance to be successful among the Chinese fashion brands going overseas.”
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