Who will be the First Listed Domestic Beauty Retail Brand？

KK Group, parent company of THE COLORIST, a well-known domestic beauty retail brand, and also the parent company of KKV, is in Hong Kong for their IPO.

On January 4 KK Technology Company Holdings Limited (hereinafter referred to as "KK Group") submitted a prospectus to be listed on the main board of the Hong Kong Stock Exchange.

It is reported that KK Group, as the "head player" of China's new retail industry, owns four self-incubating retail brands, namely: KKV, THE COLORIST, X11 and KK Gallery, with a total of 680 stores covering 31 provinces across China and one city in Indonesia. These stores cover 18 major categories such as beauty, trend toys, food and drinks, household commodities and stationery, as well as various trendy products, with over 20,000 SKUs.

In the prospectus KK Group also publicly disclosed for the first time its financial status after its establishment.

According to a Frost & Sullivan report, in terms of GMV, KK Group was one of the top three trendy retailers in China in 2020 and the fastest-growing trendy retailer among the top ten market participants, with a compound annual GMV growth rate of 246.2% from 2018 to 2020.

From 2019 to 2021 KK Group witnessed rapid growth, as evidenced by the changes in the number of stores. According to the prospectus, the total number of retail stores under KK Group increased from 80 as of December 31, 2018 to 211 as of December 31, 2019, 556 as of December 31, 2020, and further to 640 as of June 30, 2021.

Specifically, with the largest number of stores KKV (315 stores) and THE COLORIST (247 stores) have become the main engines for the sustained growth of KK Group.

In terms of the revenue structure, KKV performed extraordinarily well. From its establishment in 2019 to 2020, it took KKV less than two years to achieve revenue growth by more than 10 times to 835 million Yuan, accounting for 50.7% of the total revenue. In the first half of 2021 the revenue further increased to 1.049 billion Yuan, a year over year increase of 4.72 times. THE COLORIST, a brand also founded in 2019, was also growing rapidly with a revenue of 440 million Yuan in 2020, a year over year increase of nearly 21 times. In the first half of 2021 the revenue hit 461 million Yuan, a year over year increase of 4.74 times.

In terms of the overall revenue, KK Group achieved 155.3 million yuan (RMB, the same below), 463.7 million Yuan, 1,645.9 million Yuan, 502.4 million Yuan and 1,683.2 million Yuan in 2018, 2019 and 2020, 2020 and the first half of 2021 respectively.

After the deduction of cost, KK Group's gross profits in 2018, 2019 and 2020 were 49.8 million Yuan, 125.8 million Yuan and 499.7 million Yuan respectively, and the gross profit margins in the same period were 32.1%, 27.1% and 30.4% respectively. In addition, KK Group's gross profit in the first half of 2021 was 610.0 million Yuan, up 302% from 151.8 million Yuan in the first half of 2020, and the gross profit margin in the same period was 36.2%. 

According to the prospectus, the reason why KK Group has maintained its fast-growing performance over the past years is because it has enjoyed advantages on both the demand side and the supply side.

On the demand side, the growth of middle-class groups and the rise of national disposable income have led to the increase of consumers' spending on daily necessities. In addition, the younger generation's spending desire is particularly strong, and there has been a growing demand for immersive shopping experience. All these factors have provided favorable growth soil for the beauty trendy retail stores of KK Group which focus on young consumers-oriented marketing and offline experience.

he supply side: First, new brands keep emerging, including domestic brands and new imported brands integrated with Chinese traditional cultural elements, and this trend has facilitated the emergence of domestic collective stores; Second, new technologies keep emerging, greatly improving the operating efficiency of retailers in various ways; Third, with the development of big data, retailers have become able to simplify the supply chain and intelligently formulate the best logistics route by purchasing goods directly from brand owners, local authorized distributors or OEM and ODM contractors, thus reducing the supply chain cost.

In recent years the consumption trend of new retail has become increasingly popular. KK Group, with its capital support, has been developing rapidly. With its store style that combines immersive scenes with new retail, the brand has quickly won the favor of young consumers. If successful,this will be the first IPO in the domestic beauty retail industry, leaving a profound mark in the domestic retail history.