HLA Group Corp. Ltd., one of China's largest men's apparel retailers, announced plans for a Hong Kong stock listing to accelerate overseas expansion and brand upgrades, as the company faces declining performance and mounting transformation pressure despite its aggressive dividend strategy.

The company said on September 8 it would launch an overseas share issuance (H-shares) and list on the Hong Kong Stock Exchange as part of its globalization strategy. HLA aims to accelerate overseas business development, enhance its international brand image, and create a diversified capital operation platform to strengthen its capital capabilities.

However, the company's latest earnings reveal mixed results. HLA's net profit attributable to shareholders fell 3.42% year-on-year to 1.58 billion yuan ($217 million) in the first half of 2025, while overseas revenue reached only 206 million yuan, representing just 1.8% of total revenue. The company's inventory turnover days increased to 322.9 days, up 50 days from the previous year.

HLA has maintained an unusually high dividend payout ratio, distributing over 90% of net profits to shareholders in recent years, raising questions about whether sufficient capital remains for expansion initiatives. The company's performance has fluctuated significantly, with revenue oscillating between 18-22 billion yuan over the past six years.

Overseas Expansion as Growth Driver

HLA has positioned international markets as its second growth curve, with 111 overseas stores as of June 2025 covering Southeast Asia, the Middle East, and Africa. The company reported overseas revenue of approximately 206 million yuan in the first half of 2025, representing 27.42% year-on-year growth.

The retailer plans to systematically expand into Central Asia, the Middle East, and African markets in the second half of 2025, with its first Australian store scheduled to open in Sydney. HLA's expansion strategy focuses on "localization plus high cost-effectiveness," particularly targeting markets with significant Chinese populations and strong consumer spending power.

Guotai Junan Securities noted that Southeast Asian regions with high Chinese populations and strong purchasing power, combined with air-conditioned malls serving as premium social spaces, provide ideal development conditions for HLA's expansion model.

High Dividend Strategy Sparks Debate

HLA's dividend policy has drawn significant market scrutiny. Since its backdoor listing in 2013, the company has distributed a cumulative 21.404 billion yuan in dividends, with a dividend-to-financing ratio of 157.55%. In 2024, dividends totaled approximately 1.969 billion yuan, accounting for 91.22% of net profit.

The company's dividend payouts have consistently exceeded 86% of net profit over the past three years, far surpassing the 70% minimum threshold specified in its corporate charter. This "high dividend, low retention" approach has raised concerns about funding adequacy for overseas expansion, particularly as international revenue remains minimal compared to planned investment requirements.

Market analysts question whether such high dividend distributions may undermine the company's long-term development capacity and ability to sustain its globalization strategy amid sluggish domestic market growth.

Brand Transformation Under New Leadership

Zhou Lichen, the 85-year-old founder's son who assumed the chairman role in 2020, has spearheaded brand rejuvenation efforts. The younger Zhou has shifted marketing away from traditional CCTV advertising toward popular variety shows, enlisted young celebrity endorsers including swimmer Pan Zhanle and actor Chen Zheyuan, and personally engaged in live-streaming sales.

The company has also diversified its brand portfolio beyond its core men's wear business. Non-menswear categories, including women's brand OVV, children's brand Yeehoo, and home goods brand HLA Home, now account for 28% of revenue in the first half of 2025. HLA also operates 23 "JD Outlets" discount retail stores in partnership with JD.com.

Despite these initiatives, transformation results remain mixed. The company's signature "Men's Wardrobe" brand positioning continues to face challenges from an aging customer base and product designs that struggle to align with current fashion trends. Whether Hong Kong listing proceeds can effectively translate into enhanced product innovation capabilities will be crucial for transformation success.