Company Hopes To Fuel Accelerated Growth In Mainland China Market
As the purchasing power of Chinese consumers continues to increase, more international companies — from Wynn Macau and Las Vegas Sands to Russia’s UC Rusal PLC — are choosing to list in Hong Kong in the hopes of fueling faster and stronger growth in the mainland. As the Wall Street Journal reports today, the French skincare and personal care chain L’Occitane, which currently has 46 retail locations in China, is the latest foreign company — and the first-ever French company — to list on the Hong Kong exchange:
French skincare and personal-care retail chain L’Occitane International SA raised 5.49 billion Hong Kong dollars (US$707.0 million) from its Hong Kong initial public offering after pricing the deal at the top of its indicative range, a person familiar with the situation said Friday.
The IPO, the first in Hong Kong by a French company, is the latest by a foreign company seeking to take advantage of Asia’s high economic growth and stock-market valuations when choosing a location for its primary listing. It comes after UC Rusal PLC’s US$2.55 billion flotation in January, the first by a Russian company in Hong Kong. Like Rusal, L’Occitane is seeking growth in China, where the French company has 46 stores. The company hasn’t disclosed figures on China sales, but it said the mainland accounts for just a small portion of global revenue.
We’ll have to wait and see how L’Occitane’s planned IPO-powered expansion in the mainland plays out, but considering the projections we’ve seen recently for the cosmetics and skincare market in China, it should be successful. As Steven Leung, a director of institutional sales at UOB-Kay Hian Ltd., told BusinessWeek earlier this week, “Investor interest is strong for L’Occitane because of the outlook of growing consumption for its products, especially in China…Its products are affordable and consumers will still use beauty products even during recessionary times.”
Considering L’Occitane’s products are in the “affordable luxury” range that puts them within the reach of China’s growing urban middle class, barring some unforeseen event like another anti-French boycott, the company’s choice to hitch its wagon to the China market will likely please investors for years to come.