Apparel Textile Industry Differentiation, Terminal Demand And Inventory Facing Pressure

Recent situation of the industry Textile clothing The growth rate of the company's mid report performance in 2012 slowed down, slightly lower than expected. Terminal demand and inventory are under pressure. The company and dealers are more prudent in opening stores and ordering goods. Recently, there have been many stock price corrections. Under the background of market rebound and expected improvement, there are opportunities for valuation repair. The outbreak of the industry still needs to wait for the terminal to recover.

In the long run, we believe that there are three major factors that determine the growth sustainability of brand clothing companies: pricing strategy, competition pattern and sales model. Therefore, we divide brand clothing companies into three categories: A (industry benchmark), B (developing) and C (structural failure).

Comment 1. The overall mid report was slightly lower than expected, and the terminal pressure began to be reflected in the statements. In the first half of the year, the company's revenue growth was mostly faster than that of terminal sales. The growth rate of terminal sales in August was better than that in July, but still significantly lower than that in the same period last year. The growth rate of orders at the spring and summer of 2013 slowed down, and the profit forecast faced downward pressure.

2. The markup rate is an important indicator to measure the cost performance ratio. Due to the internationalization of dress and fashion consumption, it is difficult for domestic clothing brands to produce such strong brands as Moutai. Now, China's mass consumer market has entered the stage of price performance competition, and raising prices and markup rates may bring competitive disadvantages.

3. International brands are the ceiling of domestic brand positioning and pricing, especially in sports, youth leisure (fast fashion), luxury goods, and domestic brands face great competitive pressure. We are more optimistic about the fact that international brands are not strong, or that strong international brands have not entered China's subdivided fields in a large scale. For example, middle end formal clothes, middle end business casual men's clothes, middle end women's shoes, outdoor, etc. On the contrary, it is relatively difficult for strong international brands to enter China's sports and youth leisure development.

4. E-commerce is very easy to impact big brands in small industries, such as home textile industry. In the past, department store channels gave limited display space to small industries, which was conducive to the monopoly of large brands. However, the development of e-commerce has reduced the restrictions of department store channels on brand and product display brand Get the opportunity to display in the high passenger flow channel, and the low price is more attractive in online shopping at this stage. The challenge of e-commerce to brand operators is that if the markup rate is unreasonable, the low-cost competitors of online shopping will seize their market share; Dealers put water online, disrupting the original pricing system. Only companies with low markup rate and strict channel goods control can obtain the double harvest of online and offline business.

5. When the industry develops smoothly, the franchise mode expands faster; However, when the industry is difficult to develop, the alliance mode will worsen the situation, and sports is a typical example. The response of the franchise mode to the terminal demand is lagging behind, the inventory is overstocked in the channel, the dealer's cash flow is under pressure, leading to large-scale store closures or low price promotions, brand image destruction and other problems. Under the general environment of reducing the rate of price increase and online shopping development in the future, it is imperative to flatten the direct marketing or franchise mode.

Valuation and suggestions: Class A company: Belle is a benchmark in the brand clothing industry, with low markup rate, no strong international competitors, comprehensive direct marketing channels, and maintaining the "recommended" rating.

Focus on Class B companies: If these companies can find appropriate brand positioning, maintain a high cost performance ratio, strengthen management and channel control capabilities, and successfully operate multiple brands, they can be promoted to be Class A leading companies with larger scale and safer competition pattern. The impact of factors such as loss of cost performance ratio, competition of international brands, e-commerce, and overstocking of goods may transform Class B companies into Class C. We are optimistic about the Seven Wolves, the Nine Shepherds and the Pathfinder. Longzi and Kanudi also have room for growth.

Class C companies are advised to be cautious. If there is a big rebound, it is a good time to reduce their holdings: under the pressure of strong international brands and online shopping, the industry competition pattern has worsened, the competition between brands is unprecedented fierce, facing a reshuffle, and the final winner cannot be seen in the short term. For example, sports companies such as Li Ning in Hong Kong stocks, youth casual wear companies in A-shares, Meibang Apparel, and Sima Apparel. Home textiles The growth rate of terminal sales in the industry (Luolai, Fuanna, Mengjie) slowed down. It belongs to the category with slower growth rate in department stores. The channel inventory pressure is high, and the impact of online shopping on traditional channels is obvious.