360 Degrees Can Not Escape The Curse Of Declining Performance

"Declining performance" continues to spread in the sporting goods industry as a curse. The company, which has always boasted of its smooth operation, is also unable to escape the curse of declining performance.

In January this year, a profit warning was issued in 2012. Net profit in 2012 is expected to decline by about 40%. It turned out to be the case.

In 2012, it was the movement since the company was founded in 2002. Clothes & Accessories The most difficult year for the industry is expected to continue the unfavorable market situation in 2013.

321 degrees are very similar to the problems faced by peers. After experiencing a high growth period driven by sales growth, China's local sportswear brands are facing unprecedented crises. Terminal sales slowdown, inventory increase and channel pressure surge will eventually lead to overall sales reduction, gross profit margins and sales costs.

Faced with an oversupply of market environment, prudent strategy has become the key word in the annual report. In order to clear up the excess supply, the control of the inventory level of the sales channel was increased, and a number of orders that were ordered but not yet produced were cancelled.

There is no doubt that in 2013, for the entire local sports brand industry, "going to stock" is still the theme, this is a matter of life and death; and the development of differentiated development outside the theme is the way out, because it determines the height of each company's rebound.

It is believed that after the rapid expansion of the past few years, the development of sports apparel industry will not be driven by sales volume in the future. On the contrary, sportswear companies must win the market share with unique brand image, innovative design, good quality and high performance products and new product lines. In restoring performance growth, they will hope to be entrusted to children's clothing business.

　　 Is this card right?

　　 Can't escape the curse of declining performance

In 2012, the company's revenue was 4 billion 950 million yuan, down 11.1% from 5 billion 568 million yuan in 2011, and 715 million yuan net profit, down 38% from the same period last year.

In the terminal market, the same quarter sales in the first three quarters of last year continued to slow down (6.9%, 5.1% and 4.1% respectively), although there was a slight rebound in the fourth quarter, compared with the same store sales growth in 2011, the growth rate in 2012 was significantly reduced.

As for the decline of net profit in 2012, 331 degrees explained that after the fast growing period of sales driven by sports apparel industry, China's local sportswear was oversupplied, the average selling price and gross margin of its products were dragged down, and the competition in the industry was fierce and the business environment was difficult.

The annual report shows that clothing The average selling price dropped from 94.7 yuan per piece in 2011 to 79.4 yuan last year. Its gross profit margin was 39.8%, down 2.6 percentage points over the same period last year.

The gross profit margin is down to internal production. shoes The decline in the output of such products and the increase in the production cost of clothing products. In July 2012, special precautions were taken to reduce orders for autumn and winter orders. This resulted in a decline in the output of footwear produced by internal production, thereby making it a higher recurrent expenditure for 31st degree.

According to its earnings report, orders for 31st orders fell by 10% and 26% respectively in autumn and winter in 2012. The orders for spring and summer ordering and autumn ordering in 2013 decreased by 23% and 19% respectively.

In addition, the cost of garment production has increased, which means that the gross margin of clothing products needs to be lowered so as to maintain competitiveness in the oversupply of sports apparel and fast fashion brands.

In the face of the difficult market situation and changing consumer demand, the company implemented a plan to ensure that the better operated stores continued to be competitive and profitable. The plan includes a total of 203 million yuan direct decoration allowance to eligible stores to enhance the layout of interior decoration. The cost has been included in sales and distribution expenses. At the same time, sales and distribution expenses also include the group's recent hiring of sports star endorsements, as well as the amortization expenses of the official clothing sponsor of the second Nanjing Youth Olympic Games in 2014. Because of the above two reasons, sales and distribution costs increased by 17.9% compared with last year, accounting for 2.7% of the company's turnover.

There has been no improvement in inventory. The average daily turnover of inventories increased to 56 days at the end of last year, compared with 40 days in the same period last year, and the stock balance was 460 million yuan, an increase of 9 million 500 thousand yuan over the same period of last year.

In the face of high inventory prices, 31st degree retail sales will be sold at a substantial discount on the retail level, cancellation of orders for partial orders, reduction of the expansion of retail outlets, and enhancement of marketing efforts. In the fourth quarter of 2012, the net increase in licensed retail stores was only 12, of which 108 were newly opened shops, and 96 were closed. At the same time, it also meets the changing needs of the market by developing new products and adjusting product mix. All these factors lead to a decline in profits.

In fact, influenced by the global economic downturn and the sluggish sales in the Chinese market, most of the sports brands declined in 2012, both in terms of turnover and profits.

Lining (02331.HK) released the 26 performance report in 2012, showing that the company's annual revenue was 6 billion 739 million yuan, down 24.5% from the same period last year. Gross profit was 2 billion 550 million yuan, a decrease of 36.9% over the same period last year. The loss reached 1 billion 979 million yuan and 1821 stores closed. This is the worst performance that Lining has handed over since its listing.

Anta sports (02020.HK) 2012 annual report shows that in 2012, the company's operating income was 7 billion 623 million yuan, net profit of 1 billion 359 million yuan, down 14.4%, 21.5%. This is the first time Anta has faced declining performance since its listing in 2007. At the same time, Anta also said that this year will continue to reduce 475 -575 stores.

　　 Foreign giant Nike has also been spared.

Nike's 2013 quarter fiscal year second quarter financial report shows that China's market revenue was $577 million, the first time it fell by 11% compared with the previous year. Nike's global earnings report revealed that since the third quarter of fiscal 2012, the growth of orders in Nike China has slowed down significantly, or even dropped for two consecutive quarters.

In the "inventory plague" sweeping China, Nike is also inevitably infected. At the investor conference in the second quarter, Nike chief financial officer DonBlair said that China is still the focus of Nike's inventory management, and Nike is striving to reduce inventory problems in China, mainly through measures such as increasing discount rates and reducing futures orders.

　　 Embarrassed "sandwich cookies"

Horse racing and scale expansion are the main competitive means of many sports brands. Thirty one degree is no exception.

Statistics show that the total number of exclusive distributors is 31, and these distributors supervise 3336 authorized distributors. These authorized dealers own and manage 8082 adult sports apparel retail outlets, a net increase of 217 compared with 7865 last year. About 72% of new stores are located in three lines and smaller cities.

In fact, in the early days of the establishment of enterprises, the major cities attacked by the foreign giants Nike and Adidas attacked the two or three tier cities. Relying on sports marketing, the brand exposure rate was rapidly raised, making the 360 degree high growth on the less competitive runway for many years. However, the industry gold has passed ten years, and the era of relying on distributors to set high indicators and enhance shops' performance in a large scale is gone forever. Before 2011, the blind expansion, the double effect of high order and low sales rate made the inventory of more than one hundred and thirty one cent stock up, the industry oversupply. Even Nike, who had strong advantages in brand and distribution ability, could not get rid of the problem of high inventory.

Whether it's local brands or foreign giants like Nike and Adidas, the discount sale war for cleaning up stocks is getting more and more popular.

Lining's previous announcement indicates that as of June 30, 2012, the number of factory shops has reached 271, and the company will continue to expand the scale of factory stores. Anta also said that in the face of the high inventory risk of retail channels, Anta has taken a number of measures to respond quickly, including the establishment of factory shops and discount stores in various places to help clean up the post season inventory. Anta has also adjusted the number of orders that have not been produced and shipped with the distributors to reduce potential stock and discount discounts. PEAK also began to actively adjust orders, reduce market supply and optimize channels from last year. Strengthening factory store construction seems to be a great help for all major brands.

In line with the local brands, Nike and other foreign brands are also overweight.

It is reported that Nike plans to open 40 to 50 factory stores, which is much larger than before. New factory stores will extend from first tier cities to two or three tier cities, and their sales will remain at a low price of 3 to 60 percent off.

Insiders pointed out that Nike had long been sinking into the two or three tier cities, while consumers in the two or three tier cities had different appeals, which were relatively sensitive to prices. They started shop in two or three line cities, but provided a solution for Nike to solve the inventory problem.

In the winter of the industry, foreign brands with strong brand advantages are more ruthlessly laying out the three or four line channels that belong to local brands than local brands. The key way, CEO Zhang Qing, a sports information company, points out that if Nike adopts a low price strategy, it will affect the progress of local brands' inventory clearance. Some second-line local brands may face a survival crisis.

For the 31st degree, its position in the industry is the same as that of XTEP (01368.HK), which is equal to the second ladder brand of the industry. Compared with foreign brands and local brands such as Lining and Anta, the 31 degree product is obviously not more sticky to users than they are. Under the circumstances of general price reduction promotion, foreign brands and local brands, sinks the competitive pressure of 360 degrees, and the living space will also be squeezed.

　　 Betting children's wear

Facing the approaching of foreign brands, some local brands have made corresponding adjustments. For example, Anta began to enter the high-end market by acquiring the trademark and business of Italy brand Fila.

PEAK (01968.HK) said that on the basis of basketball, it will also enrich other categories, such as running series, women's series, and so on.

Lining's response is to test the annual growth rate of the outdoor sports market, which is more than 40% and the market size is close to 11 billion. According to reports, Lining recently went to Germany to attend an outdoor brand exhibition in Munich, accompanied by other companies such as ADI.

360 degrees chose to open up new markets. In --2010, a new brand named "Shang" was launched. It is understood that "Shang" is positioned in the high-end sports and fashion market, with the purpose of making up for the gap in the high-end market and fashion movement.

It aims at young fashion people who love sports, such as college students, corporate white-collar workers. Designer The trend of street sports enthusiasts and so on. The financial report of 31st degree did not give a detailed introduction to the operation of the brand. But compared with XTEP, which has already killed a bloody path in the sporting goods market with the concept of "fashion movement", it is no easy task for the "Shang" brand as a later member to have a share or even surpass. Like XTEP, the "Shang" brand will inevitably be squeezed by the casual fashion brand with "fast fashion" as its selling point, and will fight fiercely with its peers. We also need to solve the problem of how to ensure that products are not replaced or marginalized by leisure brands and comprehensive sports brands.

The only highlight of the 360 degree financial report is children's clothing business. According to the 2012 earnings report, the turnover of children's clothing series increased by 97.7% to 370 million yuan, accounting for 7.5% of the company's turnover last year, almost double the previous year. Average selling price and sales volume increased by 25.7% and 57.1% respectively. The average wholesale price of children's clothing is 57.3 yuan.

As of December 31, 2012, a total of 1590 children's clothing stores totaled 360 degrees, representing a net increase of 433 compared to December 31, 2011.

321 degrees said that the future expansion of adult sportswear business will adopt a prudent strategy and will not set targets for the number of shops opened this year. The children's wear business will set up about 150 stores in 2013 to excavate China's large and early childhood market and promote its overall business growth.

However, I hope that the development of children's clothing will be more than 360 degrees. Famous foreign brands Adidas and Nike entered the children's clothing market as early as 2001 and 2002. According to the China National Business Information Center, Adidas and Nike children's wear occupy the top two market share of children's clothing in recent years, occupying about 4%. The success of Adidas and Nike has witnessed the market opportunities for the domestic sportswear brands. In recent years, the market has also begun to nugget children's clothing market.

In July 2008, Anta launched the Anta KIDS brand, mainly facing children aged 3 to 14, whose products are mainly sports and lifestyle two styles, including clothing, shoes and accessories. In early 2010, Lining and the local children's clothing brand parkland signed the LiningKids brand LiningKids. In 2011, XTEP launched the brand name "Xtep+1" children's shoes and clothing series, targeting children aged 2 to 14 years old, attacking the high-end leisure fashion market. As early as in 2006, XTEP signed a cooperation agreement with the US Disney company, and entered the market of children's shoes and clothing with the help of the Disney brand "curve".

In 2012, Anta's turnover fell 14.4% to 7 billion 623 million yuan, and net profit fell 21.5% to 1 billion 359 million yuan. In the same period of decline in performance, Anta also increased the pace of development of children's sporting goods series last year, and the number of shops increased from 632 in 2011 to 833. It is estimated that by the end of 2013, the total number of children's sporting goods stores will reach 950~1000.

Insiders pointed out that in the next few years, the number of new born population will increase. Naturally, it will also increase the demand for Chinese children's children's clothing, which may be a new direction of transformation for the sports brand in the predicament. However, the phenomenon of homogenization of adult sports brands is very serious, and the development of children's clothing may also be difficult to escape.

China children's Industry Research Center pointed out that children's clothing stores in the two or three tier cities have become the main channel for children's clothing of the domestic sports brand, which is consistent with the characteristics of children's clothing monopoly, and is closely related to the distribution of commercial forms dominated by pedestrian streets in two or three cities. But it is important to note that the sustainable development of franchised stores depends on the brand's appeal. At present, the recognition and differentiation of domestic sports brands are not obvious. With the growing maturity of consumers' purchasing environment and ideas in two or three tier cities, and the gradual infiltration of more international and joint venture brands, the advantages and price advantages of such channels will be weakened. In the field of children's clothing, apart from the expansion of channels, they should also intensify efforts to establish the uniqueness of the brand and make more efforts from the connotation of the brand.