Belle International Holdings Ltd., China’s largest retailer of women’s shoes, aims to add 10 percent more stores this year after posting a 24 percent profit increase and saying it will buy rival Big Step.
Bolstered by demand from China’s increasingly wealthy shoppers, Belle’s net income in 2011 rose 24 percent to 4.25 billion yuan ($672 million) from a year earlier, meeting the average estimate of 4.26 billion yuan from 17 analysts surveyed by Bloomberg. The shoemaker will buy Big Step, a retailer of Nike and Adidas brand sportswear with 600 outlets in China, for as much as 920 million yuan, it said.
Belle, which distributes Nike and Adidas branded sportswear in greater China, is reaping rewards from the China’s push to bolster consumption at home. Premier Wen Jiabao earlier this month pledged to adjust taxes as the nation seeks to end the economy’s reliance on investment and exports in favor of boosting domestic spending. Annual urban disposable income rose 14 percent to about 21,810 yuan in 2011.
The future potential for growth in China’s consumer retail market “will not change significantly due to short-term disruptions, given the economic growth potential as well as the trend of consumption upgrade and measures to promote domestic demand,” Belle said in the statement to Hong Kong’s stock exchange yesterday.
Weaker Consumer Confidence
Consumer confidence was impacted by the slowing economy in China as higher costs, sluggish demand from abroad and the European debt crisis led to a slowdown in growth in the exports sector, Belle said. China’s economic growth in 2011 slowed to 9.2 percent from 10.4 percent in 2010. Premier Wen Jiabao set a 2012 economic growth target of 7.5 percent on March 5, lower than an 8 percent goal in place since 2005.
Shares of Belle gained 4.7 percent to HK$14.18 at the close in Hong Kong, compared with a 0.2 percent loss on the benchmark Hang Seng Index.
Profit margins will be “steady” this year, Belle’s Chief Executive Officer Sheng Baijiao said at a briefing in Hong Kong today. Production costs will stabilize and the company may increase prices slightly this year, Sheng said. Gross profit margin widened to 57.2 percent in 2011 from 55.7 percent, and operating profit margin widened to 18.2 percent from 16.7 percent, Belle said.
First-quarter sales at stores open for more than a year are expected to grow at a low single-digit pace, while the company targets a mid-to-high single digit same-store sales growth this year, Sheng said.
Sales increased 22 percent to 28.9 billion yuan in 2011, the company said.
The retailer, owner of shoe brands Staccato and Joy & Peace, said it added 1,958 footwear stores in China, a 24 percent increase from 8,312 outlets at the end of 2010.