TOKYO, Japan — Baroque Japan’s largest shareholder, CLSA, has sold its stake in the major Japanese womenswear retailer (which has hundreds of stores throughout Japan, Hong Kong and mainland China) to CDH Investments and Chinese footwear retailer Belle International. CDH has taken a 23 percent stake and Belle 31.96 percent, the latter at a cost of ¥9 billion (about $90 million). CDH has been a shareholder of Belle since it began retailing in 2004 and is very much being led by Belle in this deal, which aims to use Baroque to develop a major apparel and accessories businesses in China. Baroque currently operates just 20 stores in China and nine in Hong Kong all under the Moussy brand.
By tying up with a powerful Chinese partner, Baroque hopes to grow into a major Asian-wide apparel, accessories and footwear retailer. It has long wanted to become a serious player both in Japan and the rest of Asia, and had originally planned to list on the Hong Kong stock exchange once sales reached ¥100 billion, but that target has taken longer than expected to achieve. Baroque has also long wanted to take on the European and US markets, opening a pop-up store in New York in 2011, but, again, lack of capital has been a hindrance. Belle International may well provide both the broader Asian operating base and funding to help it finally achieve its ambitions.
For Belle, Baroque provides the key to its long-held ambition to expand beyond footwear into apparel and accessories, as well as exploit the Japanese market for its shoes. Belle owns mid-range brands like Staccato, Joy & Peace and Millies, in addition to distributing foreign brands such as Nike, Clarks, Merrell, Adidas, Puma and BCBG. It is already a huge company with a reported 20 to 25 percent market share in women’s shoes with an even higher share of the premium end of the mass market. Store numbers have reportedly more than tripled to 18,000 since 2008, with annual sales reaching some ¥500 billion.
Baroque is a good buy even for its potential just in the home market, let alone across Asia. It is one of the small set of fashion retailers that came from nothing at the start of the new millennium to dominate the trade in young women’s fashions in Japan's city centres. Formerly known as Fakedelic, the company opened its first Moussy store in 2000 with merchandise produced by Yoko Morimoto, the buyer who helped transform Egoist from a troubled importer of French fashions to the number one selling brand among the Shibuya 109 crowd in the late 1990s. In 2007, the company was acquired by investment fund CLSA, which put the business under professional management, symbolised by a change of name. Since then it has added new brands to reach a wider catchment, creating a fashion retail group with 350 stores and sales of ¥59.8 billion in FY2012. Key brands include Sly, Moussy, Rodeo Crowns, Shelter, Black and Rienda.
It is its recent move into more mass market fashion retailing through the Azul by Moussy chain that is where the real growth is however. Azul by Moussy was launched in early 2008 and has since grown to a chain of 100 stores, mostly located in suburban shopping centres, notably Aeon malls. Combining some of the store design themes from Abercombie & Fitch with fast fashion chains and its own 109 brands, Azul by Moussy has been received well by both consumers and the industry alike. Baroque already plans to create a Chinese version of the Azul by Moussy lower price chain as well as other mass market chains designed for the Chinese market.
Belle has seen its share price fall in the last six months, partly due to the loss of key brands such as Geox and Kappa, but Belle is still a highly efficient business. Buying Baroque Japan will not only make it much easier to sell its Chinese footwear brands into the Japanese market, it will also give it a solid base to build an apparel and accessories business in China and beyond. Baroque says the two companies had agreed a deal in principle a year ago but due to the political issues between Japan and China since, decided to postpone the announcement. Longer term it is expected that Baroque will list on the Hong Kong stock exchange but there is a possibility that it will be absorbed into Belle International as the apparel and accessories division of the business.
The new deal suggests serious potential for Baroque given Belle’s reach, supply chain network, logistics — it apparently has more than 100 distribution centres across China — and access to capital through CDH and other investors. With approximately 18,000 footwear stores across China, it's safe to say that Belle already has a presence in about 80 percent of China’s shopping centres, making it easy to introduce Baroque stores as well. Baroque plans to build 100 stores a year in China, growing to “several thousand” in the medium term.
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