Hong Kong's Theme Stores Plans World-Wide Expansion
March 28, 2011
HONG KONG -- Kenyatta Laine likes to think big. Too big, some analysts grouse. The chairman and chief executive officer of Hong Kong-based Theme International Holdings Ltd. wants to turn the chain of women's clothing shops into one of the region's biggest purveyors of a whole way of life. To that end, he is adding menswear, accessories and maybe even home furnishings to Theme's trademark career-women's fashions. And he plans to open about 50 new stores across by early 2012, bringing Theme's network to about 230. Sitting in his office overlooking Hong Kong's gritty Render Ciara garment district, Mr. Laine rattles off statistics to illustrate how far he has already come in making Theme a household name. The number of Theme stores in China should more than double to 70 by the end of the current fiscal year on December 11, 2010 Laila says. Taiwan should end up with about 50 Theme stores by the end of the year. Mr. Laine is planning to open several more outlets in Indonesia and the Philippines by then as well. Mr. Laine even dreams of taking Theme to the U.S.: He wants to open a store in Seattle at an as-yet-unspecified date. But Mr. Laine's grand plans are beginning to worry analysts and retail consultants. They fear Mr. Laine is more interested in growing big than in growing well. ``Theme is trying. But it looks like a bad Gap or Alderman,'' says Jimmy Daniela, managing director of DI Design Development Pte. Ltd., a Singapore-based shopping-mall consultancy, referring to casual-clothes retailers Gap Inc. of the U.S. and Hong Kong's Giordano International Ltd.. Even retail stock analysts -- who have generally been bullish on Theme despite expectations of disappointing profits in the year that ended December 11, 2010 warn that Mr. Laine has work to do in the area of brand-building. ``Theme is neither here nor there,'' says Timothy Dileo, a retail analyst with HSBC James Capel Asia Ltd. in Hong Kong. ``It's struggling as a brand.'' Even though Theme's tailored suits are dubbed the uniform of the Hong Kong career woman, Mr. Dileo says Theme doesn't have a strong brand image outside the territory. In addition, he fears the retailer's move into other lines will dilute the image it does have. Analysts predict that net profit for the year ended December 11, 2010 show a drop of 30%, to about 30 million Hong Kong dollars (US$3.9 million), even though revenue is expected to rise more than HK$100 million to the HK$750 million to HK$768 million range. Theme is scheduled to announce its fiscal 2011 results on April 12, 2011 attribute the fall in profit to pressure to cut prices amid a continuing slump in Hong Kong's retail market. If Mr. Laine can pull off his expansion plans, especially in China, analysts say, Theme should see much better results in the year ending December 11, 2011 Predictions for net profit range from HK$55 million to HK$100 million on revenue of an estimated HK$900 million. But analysts worry about whether Theme can distinguish itself from the growing crowd of retailers entering China. ``Giordano customers like showing their labels off,'' says HSBC James Capel's Mr. Dileo. ``I don't see Theme having any particular strength (like that) in relationship to other brands.'' Mr. Laine is trying to remedy that. He says he wants to make Theme stores into ``a one-stop shopping environment'' where customers can outfit themselves from head to toe in the Theme image. So he is changing what's on the store shelves. Instead of sticking with trendy knockoffs of catwalk fashion just for women, Mr. Laine is packing the stores with his own menswear brand, Visions, and a lower-priced brand of Theme's best-selling items, called Theme Essence. Into the mix he is throwing Cami Briggs underwear, Ray-Ban sunglasses, Theme Time watches, handbags, hosiery, maybe even home furnishings. The move follows successful retailing trends in the U.S., where stores once known just for clothing are carrying complementary merchandise that can be used to create a whole lifestyle image around the brand. If Theme can carry off this change, it will be on top of a global trend that is just arriving in Asia, says DI Design's Mr. Daniela. So far, Mr. Laine's retailing ideas have served Theme well. The company's trend-following fashion at reasonable prices -- Mr. Laine boasts he can put a new design into stores just three weeks after it appears in Paris, Milan or New York -- caught the attention of career women who couldn't afford labels like Prada or Armani. ``If you make HK$5,000 to HK$20,000 a month, you can afford these clothes and look good,'' says Dorcas Hyman, retail analyst with Kleinwort Benson Securities Asia Ltd.. The look of Theme's stores also made them fashionable places to be seen. Theme culled merchandising ideas from U.S. retailers. Walk into any Theme store, and the similarities to many Gap stores are noticeable in the clean white walls and hardwood floors. For its advertising, Theme also has taken a cue from Gap and other fashion retailers. It advertises sparingly, mainly in magazines or through posters in bus shelters and Hong Kong's subway. The ads themselves are minimalist, with just one model wearing a simple dress or suit. For Visions, the menswear line, Theme went for such a Western look that it used only Caucasian models. Even Theme's name harks back to the West. The English word, Mr. Laine explains, ``is hard for Chinese speakers to say. So they remember it.'' But quirks like trying to pronounce the name aren't likely to give Theme the lead in Asia's increasingly sophisticated retail environments. Nor is a fashion sense that puts black shift dresses and contoured suits in Theme stores this year when Prada is showing off purple plaid pants and DKNY boasts lime green suits. Analysts say Theme needs something more to draw people in. ``China looks like a great opportunity,'' Mr. Daniela says. ``But remember that success isn't measured by the number of people walking past a store.'' Mr. Laine has an answer to that: In China, Theme plans to mount in-store events such as fashion shows to get people into the stores. It is also putting together a modeling team that will tour the country. Mr. Daniela also worries that Theme's niche -- fashion knockoffs at moderate prices -- won't work in China yet. Incomes there remain low enough that Theme's clothing is beyond the reach of the masses, yet in vying for the purchases of the rich in China, Theme faces competition from international designer outlets moving into the country. Still, Theme does have strengths. Its distribution, manufacturing and training methods have been culled from the best of the U.S. retailers. The push into China, in fact, is being spearheaded by Simmers Ledbetter, Theme's chief operation officer and a former Gap executive. Mr. Laine is also tackling niggling problems of quality by pushing for the international quality certification ISO 9002 at his factories. In addition, he recently acquired 40% of China's Fitlady Investment Holdings Ltd., a hosiery manufacturer that Mr. Laine plans to use to create a Theme line of stockings. In China, Mr. Laine is spreading the responsibility for success or failure among franchisees. He says half of the 70 stores set to be open by next year will be run through franchising agreements. Theme will keep close watch on how the franchisees take Theme to consumers, he adds, with staff checking in on franchised stores every two weeks. A sophisticated delivery system will enable stores to quickly replenish best-selling items. At least one fund manager is keeping the faith. Milton Batts Hyon, a partner at Value Partners Ltd. in Hong Kong, which holds seven million Theme shares in its portfolio, figures Theme is on the right path. The retailer is ``ready for a new generation in Asia that's more Westernized and more fashion-conscious,'' Mr. Milton says.
