Analysis: How Can Fashion Listed Companies Create Wealth?

Corporate governance and other aspects will be opened. list The gap between the company and non-listed company. In recent years, the "Matthew effect" has become increasingly prominent in the fashion industry. This time, let's talk about how these clothing listed companies transform their wealth. At the same time, let's look at individual international. brand Listing situation.

stay Fashion industry The investment can only be transformed into the wealth of shareholders when growth is created.

Fashion can be enjoyable and popular, but sometimes it may appear dryness or like a cloud. In order to attract the attention of consumers and promote product sales, fashion companies must constantly design new and exciting products for demanding and choosy customers. Although this situation is correct in most industries, in garment industry, product renewal is dreadful. Last year or last season, or even last week's popular products, will soon be replaced by new products in the minds and minds of customers, because competitors will imitate your latest fashion trends and surpass you.

The fashion industry has huge sales and interest rates. In 2010, a total of 76 fashion listed companies listed on large US exchanges created a total of $189 billion in sales and $25 billion in after tax revenue.

Nike, Nike, Ralph Lauren, Ralph Lauren, Urban Outfitters and other well-known clothing companies are designing and market While creating value for shareholders, it adapts to changing customers' needs and sells them to their favorite products. With the gradual recovery of the market and economy, it is now an excellent opportunity to assess which strategy and performance characteristics create the most value for shareholders.

Each company is unique, so the result is that the best way to get a stronger share price is also different. In order to help the garment industry executives consider the strategic choice, a US media calculated the total return of shareholders from 2007 to 2010 for each company (TSR), which equals the capital gains and dividends of a listed company in a certain period of time, usually 1 years or longer, showing a positive or negative percentage in value. They were roughly divided into three categories: sales growth, profit margin, capital yield, reinvestment rate and distribution policy. These companies were divided into three categories: excellent (TSR per year higher than 14%), medium (TSR to 0% to 14% per year) and low (TSR below 0%).

Companies that perform well take a variety of strategies. Among them, Finish Line has a 95% annual return on shareholders. But interestingly, although the company's sales growth was weak, its profits doubled, making the pre tax profit margin increased from 5.5% in 2007 to 11% in 2010. In addition, G-III clothing group announced 27% annual sales growth (second growth in clothing listed companies' performance), creating a 34% annual shareholder return rate.

Perhaps it is not surprising that sales growth and capital yield are the most effective drivers of value creation. The average annual growth rate of the excellent companies is three. The annual average annual growth rate is 6%. Compared with the general profit companies, 5% are the most profitable ones.

Good companies grow fast, and they create higher cash to cash capital yields. The average return of a good company is 18%, the profit earning ability of the company is 15%, and the profit making ability of the company is 11%.

The reason for the high growth of many industries is to re invest the high percentage cash flow into the business through capital expenditure, working capital, new lease liabilities, acquisition or R & D. But the clothing industry is not like that. A good company does not need a lot of investment to achieve a growth rate above the average of the industry. As a matter of fact, as a part of net cash income, the average reinvestment of the outstanding companies is 73%, compared with 89% and 95% for the middle and low level companies, and the reinvestment rate of the excellent companies is lower.

Excellent companies gain more sales growth with less reinvestment, in other words, they have higher reinvestment returns. They can do so because the capital of their enterprise models is more effective. Every dollar invested in the fixed capital of the fixed plant will capitalization of the operating contract. This investment creates $1.24 in sales for the excellent companies. Compared with the companies with the general earning ability and the poor profit making companies, they are 1.06 US dollars and 0.89 US dollars respectively.

The difference in capital benefit not only creates the difference in sales growth for every dollar of investment, but also explains the difference between cash and cash returns. In these three types of companies, the average net cash income of sales percentage is the same, which is 14%. Therefore, the difference in return on capital is due to the difference in capital efficiency.

The US media also detected the tendency of cash distribution through dividends and shares repurchase, but did not find any significant difference in policy between the excellent companies and the other two kinds of companies. Compared with the capital allocation of shareholders, the efficiency of business investment is more closely related to the ability of clothing industry to create value.

This explains why excellent companies create so much value for shareholders. The products that they develop or sell are marketably marketable. They have the value of attracting customers. Each dollar investment can create more sales and net cash income.

No matter how the production facilities and retail stores are, the more efficient the capital is, the higher the cash return rate will result in greater growth with less investment. For companies with poor profitability, the lower the capital efficiency and the more expensive the growth is, the less valuable the reinvestment will create for shareholders.