Portfolio
Nature of Business
PCD stores was established in 1998 and is a rapidly growing department store group in China with an emphasis on high-end luxury products. PCD has nine self-owned stores and either operates or provides management consultancy services to 16 department stores and 1 outlet mall in Beijing and across 7 provinces in China.
The model is that of a concession based department store operator focused on branded fashion. It targets the mid to high-end retail segment in China. The group carries more than 1600 luxury brands including Armani Collezioni, Burberry, Cartier, Ermenegildo Zegna, Hugo Boss and Ralph Lauren. It also offers an extensive range of merchandise, sportswear, cosmetics and household goods.
Investment Overview
We invested US$31m for a minority stake in PCD Stores in October 2005. Anna Cheung, 3i Partner and co-head of China, took a seat on the Board. Our track record in the consumer sector both domestically and internationally was a key factor in both recognising the opportunity and winning the deal. It was access to our international retail network specifically that appealed to CEO Alfred Chan. He understood that the Chinese market had an appetite for European fashion and accessories.
The introdution to our European retail network assisted the company in growing its concession clientele and expanding its brand offering. We also advised on the appointment of a new COO and helped them put our capital to work on an acquisition and store roll-out strategy across China. During our investment period the network of self-owned stores rose from four to nine and PCD Stores demonstrated impressive growth, achieving revenue and profit CAGR of nearly 24% and 34% respectively between 2007 and 2009.
Given the strong growth during our investment period, we felt that an IPO was the best route to exit. The funds raised would allow PCD to continue its impressive growth. We worked in partnership with management to prepare for a successful IPO on the Hong Kong Stock Exchange in December 2009, which valued the company at US$1bn.