The Capital Market Has Been Cut Off By &Nbsp; Orders Will Continue To Be Suspended.

If you look closely at the top sporting goods companies in China, such as Lining or PEAK, you will find a very interesting phenomenon: the stock prices of these companies have almost been cut off this year. All of this happened on the stage of China's big consumption boom, which is really unthinkable.

In fact, after 10 years of rapid growth, Chinese sporting goods enterprises have entered the stage of mature development. When the number of channels has reached a large base, they can only raise the gross profit margin through brand pull through brand break out, that is endogenous growth, which is the only way for enterprise development. What causes the Chinese sporting goods enterprises to suffer from "flu"? Reporters take you to find out.

According to China Merchants Securities report, in the past 10 years, China sporting goods market Experienced a period of rapid development. By the end of 2009, Lining's sales of $123 million were basically the same as that of Nike in 1988. Meanwhile, Lining's 2010 Sale The amount is almost Fujian. Men's wear 3.8 times the brand of seven wolves, about 7.5 times that of baozi. Behind the surge in sales, the channel is springing up like mushrooms. According to China Merchants Securities report, there are about 8684 men's clothing companies listed in A shares and Hongkong market in 2010. In the same period, the size of sporting goods market is only 1/2 of men's clothing, but the number of shops is about 57893, which is 5.7 times that of men's clothing companies.

Take Lining as an example, the total number of shops listed at the end of 2004 was 2887, of which 2526 were Franchised Distributors, 120 were self operated retail stores and 241 were self appointed special counters. By the end of June 2011, Lining's store had increased to 8163, and it has increased 1.83 times in six and a half years.

Reporters noted that in May of this year, Lining group has announced 3 managers leaving. In response, Li Ningyuan, chief operating officer with more than 8 years of experience in logistics and purchasing management, pointed out that sporting goods enterprises have hit the ceiling by relying on the path of thickening performance of new stores. In fact, after 10 years of rapid growth, China's sporting goods enterprises have entered a mature stage of development, which is different from the development stage. Therefore, when the number of channels reaches a large base, we can only raise the gross profit margin through brand pull through brand break out, that is endogenous growth, which is the only way for the development of enterprises.

In 2010, many domestic sporting goods companies were expanding too fast, and almost every household has maintained nearly 7000 channels. Now, the whole industry is facing adjustment, so we need to adjust the channel first. For example, we should take control of routes and increase direct battalion. However, it is important to note that some sporting goods operators are in the hands of large dealers in some two or three line cities. This means that if they are to withdraw completely, they will touch on interests, so this adjustment will not happen overnight.

High inventory enterprises face repurchase pressure

In fact, due to the obvious seasonal and fast updating of clothing products, how to deal with increasing inventory has become a headache for the garment industry. In the first half of this year, Lining's interim profit was 294 million yuan, down 49.49% compared to the same period last year. But at the same time, inventory reached 992 million yuan, an increase of 186 million yuan compared with the beginning of the year. In the first half of 2011, Lining's average inventory turnover period was 72 days, which was half as long as 48 days in 2010.

Lining stressed that the goal of opening stores has now included sales outlets for "clear goods". In July, Lining announced that it would spend about 300 million yuan on the sale of "unsold products" to the distributors this year. Da Mo said earlier that it expects the group to purchase about 1 billion 448 million yuan of inventory in the next two years.

Compared with Lining, XTEP's stock explosion is even more serious. According to the China Daily, XTEP's inventory was 887 million yuan at the end of 6 in 2011, an increase of 424 million yuan or 91.77% compared with the same period last year, of which the product increased from 4 yuan to 474 million yuan at the beginning of the period, increasing 4 times. In the first half, XTEP's inventory turnover lasted for 81 days, compared with 46 days in the same period last year.

In a semi annual report, XTEP pointed out that the first half of the year's footwear and apparel products were more than 2000 and 2700 design styles respectively. In the continuous introduction of new models, at the same time, how can XTEP achieve nearly 500 million yuan inventory digestion? It is worth mentioning that, as of the middle of this year, XTEP did not make any allowance for its inventory. But in fact, in the sporting goods business, the book inventory is only part of its actual inventory, and a large part of it has been sold wholesale to dealers but not sold. In the case of XTEP's continuous development of new products, the stock that has been granted to dealers is likely to be faced with the pressure of repurchase and depreciation as Lining did, resulting in a sharp decline in net profit.

"The expansion of domestic sporting goods stocks has been too fast, which has led to a serious problem, that is, dealers have been digesting inventory in recent years, and the demand for terminal providers has not been able to keep up with them, so the industry needs self-regulation," a researcher from a veteran broker dealer told reporters. "But this process may be relatively long."

The dilemma of sporting goods stocks such as Lining and XTEP is not without historical reference. In fact, Nike, ADI and other sporting goods "originator" also encountered high inventory trouble.

In 2008, as a sponsor of the Beijing Olympic Games, Adidas was overoptimistic about the market and increased its production scale. Unfortunately, it suffered from the global economic crisis after the Olympic Games. It took Adidas more than two years to clean up the backlog of sales channels. It can clean up huge inventory and play an important role in brand appeal.

As an imitator, Chinese sporting goods enterprises have to face another pressure: fierce competition from these foreign brands.

Statistics show that this year marks the thirtieth anniversary of Nike's entry into the Chinese market. The world's largest sporting goods manufacturer has been selling for 1 billion years in China for 26 years, but it has only doubled the figure in 4 years. In 2010, Nike sold us $7 billion 580 million in the US market, followed by US $2 billion 60 million in the Chinese market. At present, Nike has more than 7000 retail outlets in China. In addition, the Oriental Securities report shows that during the period of entering the Chinese market, the annual compound growth rate of Nike's sales revenue and net profit reached 15% and 18% respectively; in 2011, the net interest rate of the company reached 10.2%, which was higher than that of the industry average 6.5%.

Compared to Nike and Adi, China's sporting goods companies are quite different after going to sea. In December 22nd, an article in the Wall Street journal entitled "Lining brand struggling in the US market" attracted market attention. The report said, "Lining has made great efforts to enter the US market by signing several high-profile spokesmen such as basketball star Shaquille ONeil (ShaquilleO Tribulus Neal), but now the operation of the front office in Portland, Oregon has encountered difficulties, and about half of the 30 designers and other employees who design tennis shoes and clothing in the US market are leaving this year."

It is true that the order data can be referred to the store.

For an investor, he may be more concerned about this problem. How can we catch the signs in advance when Chinese sporting goods enterprises are in trouble?

The first step is to focus on order data. Because the order data can reflect the dealer's order trend and enthusiasm. Take Lining as an example, it announced in November that the second quarter new product orders will end in 2012, and the order amount is flat compared with the same period last year. The average retail price and order quantity of clothing products were decreased by the percentage of low unit number, while the average retail price of footwear products increased by a few percentage units, and the number of orders increased by a high percentage per unit.

Similar cases also occurred in the 31st degree. In December, the company announced that the total amount of orders in 2012 will increase by 6%, and the order amount of footwear products will increase by 5.1%, of which 1.1% will come from volume growth. As the market generally believes that there will be more difficult economic environment next year, especially in many other sectors of the industry, there are overstocking in distribution channels, so buyers of the group franchise network are more cautious. In this regard, Bank of America Merrill Lynch believes that orders slower than expected, the target price from 6.3 Hong Kong dollars to 4.4 Hong Kong dollars.

However, some Hong Kong stock analysts suggest that investors should conduct more field research. Hui Li Investment (Shanghai) senior Hong Kong stock researcher Chen Xingyu said that if you want to really understand the industry or business operation inflection point, it is best to go to the field store research. For example, if you go to the mall now, you will find that many domestic sports products are completely independent, especially with international brands. At the same time, the price of domestic products is not cheap, which makes people feel that positioning is a problem. Now, as the international brand has become a climate, it is hard to think of losing land now. It takes at least half a year to digest inventory. In the future, industry risks are relatively large and profit margins are deteriorating. In addition, signs can be observed from company management and orders.

"The best way is to walk around different stores to see whether the discount rate has changed," said a research fellow at the Southern Securities and footwear company. "Although many clothing brands are on sale during the season, if you visit the same store frequently, you will still feel that the discount rate has changed greatly compared with the same period last year. If the discount rate drops too fast, it indicates that there is a greater pressure on store sales growth.