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China Clothier Eve May Raise $445 Million in IPO, Stake Sale

Eve Enterprise Group, the Chinese luxury menswear chain, plans to raise about 3 billion yuan ($446 million) selling shares to fund store openings as rising incomes fuel demand for tailored clothing.

The retailer, whose suits sell for as much as 20,000 yuan, plans to seek about 2 billion yuan from a Shanghai initial public offering as early as the end of 2011, founder and Chairman Xia Hua said in an interview. It’s also in talks with two overseas investors to sell a 20 percent stake for about 1 billion yuan, she said, declining to identify them.

Xia, who parlayed a personal investment of 30,000 yuan into a retailer with 500 shops, plans to add 100 outlets next year, mostly in smaller Chinese cities. She said she’s in talks to set up ventures with fashion houses Paul Smith and Georges Rech to extend Eve’s reach in China’s luxury-goods market, forecast by the government-backed Chinese Academy of Social Sciences to become a $14.6 billion market in 2015.

“It’s a good market for retailers,” Shaun Rein, managing director of China Market Research Group in Shanghai, said in a phone interview yesterday. “Men are starting to be willing to pay $2,000 to 5,000 per suit. They are, however, more attracted to foreign brands, or brands perceived to be foreign.”

Rein estimates Chinese consumers will spend $9 billion this year on luxury products.

Future Growth

Eve, with stores mostly in Beijing and Shanghai, entered so-called second- and third-tier cities this year. About 70 percent of the new outlets will be in cities such as Dalian in northeastern Liaoning province, the municipality of Chongqing, and Hefei in eastern Anhui province, Xia said.

“The smaller cities are where future growth will be,” Xia, 41, said in the northern port city of Tianjin on Sept. 14.

Eve joins Trinity Ltd., owner of China retail rights for the Cerruti 1881 label and Savile Row suitmaker Gieves & Hawkes, in expanding outside the biggest Chinese cities. Trinity plans to add at least 50 stores in places like Inner Mongolia and eastern Zhejiang province’s Zhoushan city.

Zhejiang urban households’ per-capita disposable income rose 12 percent to 14,919 yuan in the first half, overtaking Beijing to rank second after Shanghai, government data showed. Coal mining helped Inner Mongolia’s per-capita urban household disposable income rise 10 percent to 8,814 yuan in the first six months, narrowing the gap with major cities.

Sales Clerk

“Beijing and Shanghai shoppers fly to Hong Kong or to Europe,” said Rein. “Consumers in second- or third-tier cities don’t travel abroad as often. So it’s smart to set up shop there.”

Xia, who taught at the China University of Political Science and Law in Beijing, was on a research trip with students in southern Fujian province when she noticed “many retail fashion owners’ market knowledge was quite low, but their businesses were doing pretty well,” Eve said in an e-mail.

She quit and worked for almost a year as a sales clerk in Beijing’s Xidan Department Store. Xia then spent 30,000 yuan of her own money, about $3,600 based on exchange rates at the time, to open her first shop in the same mall in 1994. She focused on menswear because its trends aren’t as fickle as for women, the company said.

Eve’s sales surged 40 percent to about 1 billion yuan in the first six months of 2010.

The company has four labels -- Eve de Uomo, Nottinghill, Kevin Kelly and Jaques Pritt. Prices range from more than 3,000 yuan for an Eve de Uomo casual shirt to about 10,000 yuan to 20,000 yuan for a Kevin Kelly suit.

In comparison, an outfit can be custom made at the South Bund Fabric Market for as little as 600 yuan.

China’s Millionaires

Luxury companies are expanding in China, where the number of millionaires soared 31 percent last year, according to research by Capgemini SA and Merrill Lynch & Co.

Paul Smith, led by the British designer after whom the company is named, has shops in at least 21 markets including Japan, Hong Kong and Taiwan, according to its website. Company executives at Paul Smith and Georges Rech weren’t available for comment.

LVMH Moet Hennessy Louis Vuitton SA, the world’s largest luxury-goods maker, in July said first-half China sales grew 27 percent, more than twice Europe’s rate. PPR SA’s Gucci Group NV said revenue expanded 40 percent in mainland China in the first half. Mainland China excludes Hong Kong, Macau and Taiwan.

Eve’s stock offering would add to the $74 billion estimated to be raised through share sales in China this year that would make it the world’s biggest IPO market, according to PriceWaterhouseCoopers. More than 200 China IPOs have been announced so far this year.

Investment from overseas may help Eve develop its brands, Xia said. “Investor appetite for the Chinese consumer market is extremely hot.”

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