Key Points:

• KK Group files for a long-planned Hong Kong IPO after turning profitable and rapidly expanding
• The company’s revenue and gross merchandise value (GMV) have seen significant growth, boosting investor confidence

By Edith Terry

KK Group Co. Holdings Ltd. is taking a big leap of faith with its fourth attempt at an IPO in Hong Kong, hoping to finally make it to market after previous failed attempts. The company, which operates brick-and-mortar lifestyle chains, is capitalizing on the resurgence of offline retail experiences, especially with Asia’s Gen Z population. This latest filing comes at a time when the company has turned profitable, paving the way for a potential successful IPO.

Amidst the e-commerce dominance in China, the Covid-19 era has triggered a nostalgic yearning for traditional retail experiences, driving the company’s growth and reshaping the retail landscape. KK Group operates in the “non-grocery offline lifestyle retail” market, alongside other successful players such as AS Watson Group and Miniso, tapping into an estimated market worth $42 billion in 2022 and projected to reach $102 billion by 2027.

The company’s previous IPO rejections were primarily due to its weak financial performance, culminating in significant losses in 2020 and 2021. However, the tide has turned for KK Group, as it achieved a modest profit in 2022 and recorded a substantial profit in the first 10 months of 2023. Its revenue and GMV have seen robust growth, driven by a consistent expansion of its store network and a shift towards immersive retail experiences.

KK Group’s ambitious growth strategy has already made inroads in foreign markets, with promising sales and profitability in Indonesia. Despite facing challenges, the company’s embrace of self-operated stores and house-brand products has positioned it as a compelling investment opportunity for retail-focused investors.

Embracing Expansion and Self-Ownership

KK Group has revved up its growth engine by extensively adding new stores, primarily focused on its marquee brands Colorist and KKV. The company’s strategic move from a predominantly franchised model to self-owned stores has proven to be a game-changer, significantly boosting its profit margins. This shift, while demanding higher operational costs, has allowed the company to capitalize on market trends and has been fundamental to its financial turnaround.

The company’s foray into international markets, particularly in Indonesia and Malaysia, has not only diversified its revenue streams but also showcased the global appeal of its retail concepts. The impressive performance of its overseas stores bodes well for its expansion strategy and underscores its potential to transcend geographical boundaries.

KK Group’s determination to position itself as a self-operated retail powerhouse has not been without challenges. The company’s increasing reliance on third-party brands and competition from established players in the offline lifestyle retail segment underscore the complexities of its endeavor.

The company’s Hong Kong IPO venture arrives at a tumultuous time for China stocks, with many trading at multi-year lows. Nonetheless, KK Group’s relentless focus on growth, supplemented by a strategic shift towards self-operated stores and proprietary brands, presents a compelling narrative for potential investors seeking exposure to the evolving dynamics of offline lifestyle retailing.

This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.