When television advertising ruled the fashion world, HLA Group Corp. Ltd. (600398.SH) became synonymous with Chinese menswear through clever celebrity endorsements and a simple, powerful positioning: "The man's wardrobe." The brand captured the imagination of China's "everyman" and rode that appeal straight to the top of the industry.

Now HLA wants to bring that everyman story to global investors. The company filed listing documents with the Hong Kong Stock Exchange late last month, hoping a Hong Kong IPO can provide the capital and momentum needed to reverse some troubling trends at home.

The numbers tell a story of a brand struggling to maintain its edge. HLA's net profit dropped 25% in 2024 as revenue declined 3%, according to the company's listing document. While revenue ticked up 3% in the first half of 2025 to 11.24 billion yuan, profit continued sliding, falling another 3% to 1.59 billion yuan. For a company that once seemed unstoppable, these are uncomfortable realities.

Still a Giant, But Facing Headwinds

To be clear, HLA remains a formidable player. The company was the world's second-largest menswear brand by revenue last year, according to third-party data cited in its listing document. In China, it's even more dominant, controlling 5.6% of the menswear market—more than the combined share of its next four competitors. HLA is the only menswear brand in the country generating more than 10 billion yuan ($1.41 billion) in annual revenue.

The company operates through four business segments: proprietary brands (including its core HLA menswear line, OVV womenswear, and YeeHoO children's wear), international sports brand partnerships, corporate apparel customization, and urban outlets. But it's that core menswear business that built the empire, and it's showing signs of age.

From Wool Mill to Market Leader

Founder Zhou Jianping started HLA in 1988 with 300,000 yuan paid to a wool mill in Jiangsu province for his first products. The breakthrough came in 2002 during a trip to Japan, where Zhou was struck by local apparel brands' approach: wide variety, low prices, and supermarket-style self-service shopping. He brought that model back to China, opening the first HLA store on Zhongshan North Road in Nanjing.

Zhou's marketing instincts and precise positioning turned HLA into China's menswear leader. The company listed on the Shanghai Stock Exchange in December 2000, and by 2015 its market value briefly topped 100 billion yuan during a period of rapid expansion.

Then the tide turned. Online shopping created powerful headwinds for mass-market apparel brands, and HLA's stock tumbled from those heights. More problematically, the brand developed an image issue as fashion trends accelerated. Despite retaining its market-leading position, HLA's styles are increasingly out of step with younger Gen Z consumers, eroding its reputation as a trendsetter. The company responded by expanding into women's and children's clothing several years ago, but the core challenge remains.

The Inventory Problem

HLA's latest financials reveal the scale of its challenges. Revenue fell nearly 3% last year to 20.2 billion yuan, while profit sank nearly 25% to 2.19 billion yuan. The first half of 2025 showed marginal revenue improvement, but profit continued declining.

Making matters worse, inventory levels remain stubbornly elevated. Inventory approached 12 billion yuan last year, up 28% year-over-year. By September 2025, it stood at 11.52 billion yuan, up 12% from June alone. Trade and bills receivables are also climbing, rising 20% year-over-year to 1.25 billion yuan by the end of 2024, then jumping another 20% between June and September 2025 to reach 1.56 billion yuan.

Here's the vicious cycle: slowing sales lead to ballooning inventory, receivables rise in lockstep, and the company responds by ramping up spending on distribution and sales. Those expenses have climbed steadily from 3.4 billion yuan in 2022 to 4.8 billion yuan last year, reaching nearly 2.5 billion yuan in the first half of 2025 alone. With revenue growth elusive and costs difficult to trim, the company is essentially spending more to run in place.

The broader Chinese apparel market isn't helping. Growth averaged just 3.9% annually from 2020 to 2024, and is projected to pick up only slightly to 4.7% from 2025 to 2029. Apparel simply isn't a high-growth category anymore in China.

Looking Beyond China

Facing these domestic headwinds, HLA has turned its attention overseas. The company launched an international strategy several years ago and now operates over 100 stores across Southeast Asian countries including Malaysia, the Philippines, and Vietnam. In September, it entered Australia with its first store opening in Sydney.

If the Hong Kong listing succeeds, HLA plans to use proceeds partly to enhance its international brand image and competitiveness. The company also aims to fund investments and acquisitions, targeting international brands to expand its global sportswear portfolio.

The catch? Overseas business currently represents a tiny fraction of HLA's revenue. International sales reached 355 million yuan in 2024, up 30.8% year-over-year, and grew 27.4% in the first half of 2025 to 206 million yuan. That's less than 3% of total revenue. The growth rate looks impressive, but HLA is essentially starting from zero on the global stage.

Valuation Context

Among Chinese apparel brands listed in Hong Kong, menswear-focused China Lilang (1234.HK) currently trades at a price-to-earnings ratio of nearly 9 times. Sportswear leaders Anta (2020.HK) and Li Ning (2331.HK) trade higher at around 14 times, while winterwear specialist Bosideng (3998.HK) sits at a similar level of 15 times. Applying a P/E multiple of 12 times would value HLA at around HK$40 billion ($5.14 billion), roughly 20% higher than the current value of about 30 billion yuan for its Shanghai-traded shares.

Whether investors will embrace that valuation depends on whether they buy HLA's international growth story. The company needs to prove it can translate its domestic dominance into overseas success—and do it quickly enough to offset the challenges at home.