Bailey To Return To Hong Kong Stock Market

After five years, "shoe king" Belle will return to the Hong Kong stock market.

On July 27, 2017, Hillard capital, led by CDH investment and wise venture capital, composed of the management of Belle International, completed the privatization of Belle International at a price of HK $53.1 billion.

After privatization, Belle International was divided into two parts

The surging motion plate is a high-quality asset with stable growth. On October 10, 2019, taobo was listed on the Hong Kong stock exchange. Its closing price on the first day was HK $9.25/share, up 8.82% from the offering price. Its market value reached HK $57.4 billion, which has exceeded the market value of belle when it was privatized. It can be said that only a big fight to make Hillhouse capital achieve capital preservation.

The footwear and apparel sector is now packaged into Belle fashion group, which is waiting for a hearing. So what has Bailey experienced in these five years?

01 What happened to belle?

From the perspective of revenue scale, Belle has walked out of the trough. As of February 28, 2021, the income of Belle was 21.737 billion yuan, which had exceeded 20.28 billion yuan of 2016 / 2017 fiscal year before privatization. What's more gratifying is that shoes begin to grow back to the positive direction. Although the growth rate of clothing is declining, the first three quarters of 2021 / 2022 still have a high growth rate of 17.57%.

In the first three quarters of 2019 / 2020, 2020 / 2021 and 2021 / 2022, Belle's overall revenue was 20.014 billion yuan, 21.737 billion yuan and 17.627 billion yuan respectively, of which online accounted for 16.41%, 21.53% and 25.56% respectively, which was mainly due to the rising proportion of online sales of shoes.

In less than five years after privatization, Baili footwear stores experienced a wave of closures, closing 4689 stores at a rate of 2.7 a day, a total of nearly 40% less. But the efficiency of the rest of the stores has improved a lot. In the 2016 / 2017 fiscal year, Belle's footwear revenue was 18.96 billion yuan. Given that Belle's online share was single digit at that time, and if all the revenue was counted as offline, then the revenue of Baili's single shoe store was about 1451500 yuan, and by 2020 / 2021 fiscal year, this figure had become 1.789 million yuan.

The increase in online share and store efficiency has resulted in an increase in profits. The net profit of belle fashion group in the fiscal year 2020/2021 was 2.616 billion yuan, which has even exceeded the 2.416 billion yuan of Belle International, which has not yet spun off taobo in 2016/2017.

　　 02、 What did Hillhouse do to belle?

It can be seen from the list of directors and senior executives and the change of equity structure that after privatization, Deng Yao, founder of belle, and his family members completely cashed out, while Sheng Baijiao turned to the background, and his nephew Shengfang was the CEO. In addition to Hu Xiaoling, who participated in the privatization boom, Yu Wu and CDH investment, Baili's list of directors and senior executives has changed.

At the time of privatization, Zhiren venture capital accounted for 31.13%, Hillhead capital accounted for 56.81%, and CDH investment accounted for 12.06%. After the privatization, Hillhead capital and CDH investment transferred some shares to the management team's wisdom venture. The proportion of shares of Sophie venture capital increased to 46.36%, and that of Hillhouse capital involved in the transformation accounted for 44.48%. However, the proportion of pure financial investor Dinghui investment was the largest, accounting for 9.16%.

In the existing list of directors and senior executives, Hillhouse capital only includes Weng Wanjing, assistant chief financial officer. But in fact, Hillhouse capital has played an important role in the split and transformation of Belle International. Hillhouse capital once took over the IT team of Meili, and built a huge post investment management team to be responsible for the technology empowerment of major projects. After the privatization of belle, Li Liang, partner of Hillard capital, joined Bailey as the executive director. With more than 120 technology and operation experts and Bailey's original team, they jointly explored the road of digital transformation.

Zhang Lei, founder of Hillhouse capital, pointed out Baili's problems in his book value: before digital transformation, Baili's process was fragmented, and some business lines were not clear, and there were no analysis, decision-making and feedback nodes; The underlying data is fragmented, and the store data cannot be synchronized to the brand; Horizontal data is fragmented, and the data of different regions, channels and stores are not interlinked, so it is impossible to "merge similar items"; The upper level data is fragmented, and the macro data can not help the front-line sales personnel to answer questions quickly, and can not realize the timely adjustment of the supply chain.

In 2017, Zhang Lei put forward the "dumbbell theory". One end of dumbbell is the innovation penetration in the new economic field, the other is the transformation and upgrading of traditional economy, and capital is to play an integrated role in the middle. When applied to Belle, the new solutions must be based on the original core competitiveness of belle.

For Belle, it is a better way to use the new retail mode to improve the management efficiency and the level of science and technology, to increase from the market, and to obtain more market share through competition. Specifically, at the practical level, what Belle needs to do is to integrate the whole process of modeling and design, production and manufacturing, storage and transportation, store sales and member management into the data system, and apply big data capabilities to the process of discovering, reaching and serving consumers.

Zhang Lei introduces in his book, for example, in the analysis and decision-making level, Hillhead's team has helped Baili do two things: one is to develop a terminal enabling tool, which can adjust sales forecast and inventory parameters by collecting real-time flow data of stores and business districts, as well as fitting rate and purchase rate data of each pair of shoes, so as to connect consumer preferences with design and production; The second is to reposition store managers and clerks, and provide more intelligent arms to front-line employees through the design of intelligent store decision-making platform. Instead of suffering from the operation process of "transferring goods, out of stock, and pressing goods", shop assistants take tasks from digital tools, play games, optimize store display and product layout, complete the sales and service process under the guidance, and become the fashion consultants of consumers.

The final effect is obvious. Bailey has closed a large number of inefficient stores. With the help of digital tools, Ping efficiency and human efficiency of other stores have been improved to a certain extent, while the revenue gap of closed stores is supplemented by online channels. Finally, Baili realizes growth recovery and basic improvement.

　　 03、 Can Zhang Lei's "triple return" logic be realized?

Asia private equity once reported that in the process of raising Hillhouse fund phase IV, when Zhang Lei explained its investment logic and return expectation to LP, he described a logic of "triple return", that is, low transaction price, high-quality assets and technology empowerment.

The low transaction price means that Belle's market value and value did not match at that time, and it was undervalued as a whole. When Zhang Lei mentioned the value of belle, he estimated a model. In 2017, Belle had about 20000 self operated stores and more than 80000 front-line retail employees facing consumers. The number of people entering Baili's stores every day was 6 million. If converted into 6 million dau, Baili could be regarded as one of the top five e-commerce companies in China, and Belle had its own factories, The whole industry chain covering from raw material processing to retail has been realized. However, if this value is not strategically involved, belle is still likely to follow the footsteps of Daphne, rachabel and egger.

Asset quality refers to the agency of Nike, ADI, puma, converse and other international sports brands. After listing, toubo has indeed brought enough returns to Hillhead. Technology empowerment refers to the transformation and upgrading of belle and taobo with digital tools to maximize their value.

However, the overall Hong Kong stock market is in a sluggish state, and the market value of taobo has dropped to HK $38.63 billion. In view of the fact that Belle fashion group's current revenue scale is smaller than that of taobo, the profits are similar, and the asset liability ratio of belle is as high as 82.7%, the cash reserve of RMB 2.113 billion is not enough to repay the short-term bank loans of RMB 3.796 billion, and part of the funds raised by IPO will be used to repay debts The long-term capital pressure of the mode of factory self-management is also relatively large, so the market value of belle after listing is estimated to be no higher than that of taobo.

It will take a long time for Hillhouse to achieve "three times return" through taobo and Baili.