Semir's Back Secret: A Sharp Decline In Performance, Caught In The 2 Billion Acquisition Trap

Semir Clothes & Accessories It's a problem, and obviously not too small. Because it is hard to predict its future.

"I have been here for two or three years, and I have never seen such a bleak situation in the first half of this year. Domestic casual men's clothing is not easy to do. In the next six hundred years, if we open up a few European and American leisure brands, we really don't know how to pass the day. On the day of the end of July 2013, when a staff member was talking with reporters in Pudong's Sen Ma shop, the tone was full of frustration.

And in the better location of Xuhui Sen Ma store, the situation seems to be not very good, only two or three people who are sparse, but also look at more and buy less.

"Compared with the same period last year, it was still bleak. No more than 60% of the inventory was for more than half a year. Now we are counting on discount sales. " A shop assistant in Xuhui said helplessly to reporters.

This is only a microcosm of Semir's 002563.SZ performance.

In fact, since its listing in 2011, Semir's performance has been declining and its share price has plummeted.

In the face of bottlenecks in growth, Semir started a series of acquisitions to implement its multi brand strategy. However, the 2 billion yuan acquisition of zhe Mu is still controversial, causing much controversy. "Now Semir is in the strategic stage of deployment and is at a turning point. There are two sides to this turning point. It may be good or bad. It depends on its ability to integrate the acquisition of this business is not strong, and whether the new business can make a good contribution to the main business. " shoes Independent commentator of service industry, Ma Gang commented.

　 Declining clothing First strand

Semir is mainly engaged in dress design and development, outsourcing production, clothing marketing and distribution, and owns two brands of Semir casual wear and Barbara children's clothing.

According to the market survey data of Euromonitor, the Semir brand owned by Semir is the second largest leisure wear brand in China in terms of terminal sales revenue in 2008. Balbala brand is the largest brand of children's clothing in China.

Semir apparel was launched in March 2011, when the initial price was up to 67 yuan / share, corresponding to the price earnings ratio of 44.97 times. According to the total share capital of 670 million shares, the market value is as high as 44 billion 890 million yuan, exceeding the market capitalization of the United States at that time 30 billion 482 million, and the market value of YOUNGOR (5.76, -0.01, -0.17%) 25 billion 93 million.

But after the listing, Semir's performance growth slowed sharply compared with before. In the first three years of the listing, from 2008 to 2010, the total operating revenue of the company was 3 billion 323 million yuan, 4 billion 250 million yuan and 6 billion 287 million yuan, up 82.34%, 27.92% and 47.92%, respectively. The total operating income of the listed companies in the same year and 2012 was 7 billion 761 million yuan and 7 billion 63 million yuan respectively.

From 2008 to 2010, the net profit attributable to Semir owners was 443 million yuan, 687 million yuan and 1 billion yuan respectively, representing an increase of 195.52%, 54.90% and 45.69% respectively compared with that of the previous year. In 2011 and 2012, the net profit of Semir was 1 billion 223 million yuan and 761 million yuan respectively, and 22.26% in 2011, and 37.81% in 2012.

In 2009 and 2010, the number of Semir stores was 5159 and 6683 respectively, representing an increase of 1099 and 1524 respectively over the previous year. In 2011 and 2012, the total number of Semir stores increased by 1045.

On the other hand, although the total assets of Semir have increased substantially, its operational efficiency has dropped sharply. In 2008, Semir's total assets were only 1 billion 73 million yuan, and it has expanded to 9 billion 271 million yuan by 2012, and increased by 7.64 times in four years. And the United States apparel (8.61, -0.05, -0.58%) at the end of 2008, the total assets of 4 billion 577 million yuan, 2012 at the end of 7 billion 6 million yuan, four only increased by 53.07%.

In terms of total assets turnover, Semir, which was far ahead, was left behind by the US state. From 2008 to 2012, Semir's total assets turnover dropped rapidly from 4.11 to 0.77, while the US bond fell 1.39 times to 1.20 times.

Why is the decline in Semir's performance after listing? Semir's fashion director Zheng Hongwei declined to be interviewed on the grounds of "sensitive period".

One in Shanghai Spin Garment industry analyst told reporters: "Semir's performance decline is mainly due to the impact of foreign brands and the downward trend of the industry in the garment industry. The second is the decline in demand for terminal consumption. In addition, Semir mainly depends on joining this mode of development. Franchisees are more sensitive to the market itself, and the defects of the affiliate mode are highlighted under the bad market background.

"There are three bottlenecks in Semir's current development: category bottlenecks, market bottlenecks and management bottlenecks." Ma Gang, an independent critic of footwear industry, said.

Ma Gang said, Semir is a casual wear and children's clothing Brand Company, its market position in these categories is better, but contrary to other categories, it is no good, it needs to break through the category bottleneck, make up for the short board of category bottleneck. Semir's second short board is the bottleneck of the market. "It has been in the Chinese market for so many years, and the number of shops and customer groups is hard to achieve a rapid growth. Restricted by the category itself, it is hard to get more increments."

The third short board is the bottleneck of management. "From Semir's growth history, we know that Semir's success is through marketing, then inviting business, inviting one or more stars, or sponsoring the competition to let everyone in this brand know, then sell the brand's fame and products together to the agents, and then run the store to the whole country. The first phase of the brand development is like this."

"Obviously, this kind of play was very advanced ten years ago, but now it seems to be a very effective way to play. It is difficult to achieve growth through the existing mode. What should we do? We need to make breakthroughs in management. In fact, many brands are making this breakthrough, from wholesale to retail, in management innovation. Ma Gang said.

In the view of Yang Dayun, President of UTA Fashion Management Group, the basic characteristics of Chinese clothing (8.53, -0.07, -0.81%) enterprises are that the growth cycle is too short. The second is that their success is based on the market demand at that time, and the opportunity of the market is bigger than that of the market at that time. Many enterprises grew up in this environment in the early years. Therefore, in the face of fierce market competition, their actual competitiveness is relatively weak, for example, R & D capability, operation, logistics, supply chain, information feedback, to the retail end, and brand promotion, control ability, comprehensive strength will be relatively weak.

Yang Dayun believes that Semir brand itself has little room for growth. "No matter how much investment there is, the growth of the number of shops and the growth of market recovery, I feel that the era of rapid growth has passed. The slow growth of this brand is inevitable, and it is very difficult for you to see much of it from above."

　 However, he thinks Semir's children's clothing brand Barbara will have room for growth in the future.

"The biggest difference between Semir and the United States is that Semir has a Barbara, because everyone is optimistic about China's future children's market, so Barbara is the largest child market in China so far, compared to paramount, ANN, and pig, Semir is larger than their three plus." Yang said that

"I think that the two elements of Semir are mixed together, which is more bright than that of the United States. So I think Semir should put the emphasis and strength of investment on the children's market, and finally strengthen its advantages in the children's products market and other areas of children. {page_break}

　 2 billion acquisition trap

While the performance has dropped sharply, Semir has shocked the industry with a controversial merger.

In June 19, 2013, Semir clothing announced that it would purchase 71% stake from zhe zhe group and Yang Herong, from 1 billion 980 million yuan to 2 billion 260 million yuan to Zhejiang zhe Holdings Group Co., Ltd., and the remaining 29% stake was held by zhe Mu Shang management team. After the completion of this transaction, zhe Mu Shang will become a controlling subsidiary of Semir apparel.

China zhe Mu Shang is a self owned clothing Brand Company, which is mainly located in high-end casual menswear, and owns GXG, gxg.jeans, gxg.kids and other brands. Since its establishment in 2007, the company has grown rapidly and is known as a dark horse in the industry. In just over 6 years, it has opened more than 1200 retail outlets in mainstream department stores and shopping centers throughout the country. GXG in Wanda, Yintai, ocean, new world (6.18, -0.02, -0.32%) and other major chain stores, men's clothing brand sales are among the top three, in Taobao platform men's clothing e-commerce sales also ranked the front row.

Semir's board of Directors believes that zhe Mu is still effectively filling up the business of high-end casual wear in products, channels and customer groups. At the same time, it also provides resources such as channels, talents and supply chain for other high-end brand businesses. This transaction will strongly promote the implementation of multi brand strategy.

However, the market refused to believe in Semir's vision. Semir shares fell sharply after resumption. As of July 26, 2013, the closing price of Semir apparel was 20.62 yuan, down 16.42% from the closing price of 24.67 yuan before May 29th's suspension.

"The share price is relatively large, mainly because the market feels that the price is too high and that the growth of the company has reached its peak after the end of the acquisition." Shanghai garment industry analyst said.

According to the announcement, the main financial data of zhe zunshang's unaudited pro forma consolidated statements in 2012 were 1 billion 327 million yuan in total assets, 272 million yuan in net assets, 1 billion 398 million yuan in operating income, 260 million yuan in operating profit and 206 million yuan in net profit.

"If the purchase price of 2 billion yuan is calculated, the acquisition of PE will be as high as 16 times, and in fact 8 to 10 times PE will be enough." The analyst thinks, "but the advantage is that it is not just a team to do that after the acquisition, but also to retain the ownership of the former executives."

Independent commentator Ma Gang, a shoe and garment industry, said: "in fact, for Semir, the purpose is very simple, that is, through acquisitions to expand its category, increase its market space, because the growth rate of GXG can still be, this brand has only more than 1000 stores in the country, and now the way of covering the way of Sam Ma now, GXG if there is a little down to China's two or three tier cities, there will be room for opening two thousand or three thousand stores in the future. It can make greater use of existing management experience, customer resources and agent resources. "

But he also pointed out that for Semir, it would take two or three years to see whether the combination of the two companies would be appropriate. "Now that Semir has not really been involved in the management of this company, it is still a spectator, but it has paid the money to enjoy its rights and interests, but its participation in management is not high."

In the view of Yang Dayun, President of UTA Fashion Management Group, Semir and GXG are all casual wear. Semir is a traditional casual wear. GXG is younger and 90 later. Semir is also conducive to expanding its influence in the field of leisure wear, especially in the 90 year after market, through the acquisition of GXG. For the 90 time, GXG is more attractive than Shen Ma, so he thought it was a good deal.

"But there is a big risk in this transaction. 2 billion bought GXG, and GXG's profit is two hundred million, equivalent to 16 times to 17 times PE to buy this enterprise, I think the price is relatively large." Yang said.

"Another problem is seven to three, seventy percent to give them cash, thirty percent or to retain the other party's equity, but this will create a problem: if the executives and the company's top executives are basically cashed, and get the future value of the company's sale, such a new team after Semir's acquisition, even if it is to maintain the original team, will certainly face a painful period, this pain period is facing two cultural conflicts. The high level and core personnel that have been fulfilled may also be lost, which has great uncertainty for Semir's future growth. I think it's a bit too large to cash in. "

In his view, the biggest risk is still behind. "GXG and the bird of peace. clothes Compared with the traditional casual wear such as Semir and Smith Barney, the style is quite obvious, but the product with obvious style has a huge risk in the market, that is, once the fashion is not popular, this brand transformation is very difficult. People who make this line of clothing know that the more personalized brand it is, the smaller the brand will be. Once the personalized brand becomes the public, the brand will face a problem when it runs on a large scale. Once the demand for this kind of market is slowed down or stopped in the future market, the chance of successful brand transformation is not too great.

It is worth noting that GXG had planned to go public, but eventually gave up. "It may have its own reasons for being forced to do so, and the specific reason is not clear. As far as I know, its inventory is a little big and its capital turnover is a bit difficult. There may be other reasons, such as the disagreement among shareholders. " Ma Gang said. According to Yang Dayun analysis, "it is far from being expected to be listed now. It is not clear when to open up, and even when it is open to GXG, it is also a problem. And GXG itself may be worried. I just said, how long is this style going on in the market, and another is because of the recession of the market, GXG's performance in 12 and 13 years has already shrunk, which is large or short in the future, and GXG itself is uncertain. It is doubtful that Semir will help them to realisse 16 times the P / E ratio and whether it will be listed more than 16 times. In this merger, GXG is a more cost-effective business. " {page_break}

　　 Domestic competition of international brands

In June 2012, the board of directors of Semir approved the establishment of a wholly owned subsidiary, Shanghai Semir Investment Co., Ltd. The company's registered capital is 200 million yuan, and its initial investment is 100 million yuan. Its main business is to invest and cooperate in various forms such as share holding, holding, joint venture and so on, aiming at enterprises with potential for development in different segments of the apparel industry. In November, the Board approved the motion to establish Hongkong Semir Investment Limited. The company has a registered capital of HK $50 million, mainly for overseas investment cooperation, as well as brand promotion and sales of its brand in Hongkong.

At present, Semir has participated in the middle end men's clothing brand GLM and women's wear brand Minette.

"Semir now has more cash on hand. It needs to find a suitable time to spend the money to get a good return. This is where it is more urgent. " Ma Gang said that now Semir is in a strategic deployment period, at a turning point, this turning point has two aspects, it may be good or bad. It depends on its ability to integrate the acquisition of this business is not strong, and whether the new business can make a good contribution to the main business.

He pointed out that although many brands are expanding many kinds of products, they seldom succeed. There are many reasons, such as the lack of management capability, or the mistake of brand positioning.

"Another thing we notice is that a lot of companies are not going to create a brand themselves to buy other people's brands. Acquisition of a mature brand, its existing brand has certain advantages in the market position, it has a fixed consumer group, a fixed store, a fixed brand range and positioning, if created by itself, it is very slow, it is very difficult to shape, it is very difficult to achieve good results. Ma Gang said.

Yang Dayun, President of UTA Fashion Management Group, told the financial weekly newspaper reporter that China's casual wear, the largest Semir and the United States, basically grew up to the present and faced the dilemma of growth. But on the other hand, the demand for the market looks very large, even if Semir and the United States add up to about 20000000000 of the sales, and the newly entered H&M, ZARA or other international brands, their sales in China far exceed this amount. While China's local brands are surging forward in foreign brands, they are in a dilemma of slow growth, increased inventories and greater investment risks.

In addition to the impact of external economic problems, there is another problem: the domestic brand growth cycle is too short. It took only ten years to grow to this scale. In the process of growth, brand growth potential and brand attraction to customers are declining. Under such circumstances, do enterprises continue to invest in stimulating the brand to grow against the trend in this weak market, or to increase their earnings and influence in the market through mergers and acquisitions? When the economy is in a state of depression, I think it is a good choice for many enterprises to find new opportunities in the market through mergers and acquisitions and M & A, or to enhance the competitiveness of their own brand clusters. Yang Dayun said.

However, in Yang Dayun's view, faced with strong international rivals such as H&M, ZARA, UNIQLO and so on, the domestic brands, no matter who the M & A is, one, two or ten, are tied to Semir's flag. From a strategic point of view, no brand can be combined with Sam Ma Jia, and it can form a confrontation with H&M and ZARA.

"This kind of merger and acquisition can not change the competition pattern, because domestic brands do not possess this strength, even if the United States and Semir do not have this strength together." He said.

For Chinese enterprises to do cross-border mergers and acquisitions, Yang Dayun said: "domestic enterprises, including all the listed companies, can only acquire some second-line brands by merging the international enterprises. The first line can not catch up with us. For example, the big brands of MRH and PPR in the front line are all big gold companies holding shares. It is difficult for us to set foot in it, and if we take the money we buy to merge, I think it is equivalent to rats eating elephants."

In his view, the biggest trouble for Chinese enterprises in cross-border mergers and acquisitions is that they do not have international operation experience and lack of internationalized operation teams.

"You can't buy a brand only in the Chinese market, so we have a lower rate of success in acquiring an international company than domestic enterprises," he said. "Now for Chinese enterprises, mergers and acquisitions of domestic enterprises can not form an equal competition pattern with these powerful international competitors, and the acquisition of International enterprises lacks effective control capability." Yang said, "so we are in a dilemma. The main reason is that the development time of domestic enterprises is too short, and one is that the scale is too small, and the comprehensive strength needs to form the future competitiveness in the situation of merger integration and self breakthrough development, but this will not improve in five to ten years."

He believes that for the domestic listed companies, the past five years is a very painful process. Non acquisition funds are idle on account. Mergers and acquisitions also can not change the competition pattern, and want to buy a brand that changes the competition pattern, but has no control capability. "So in the process, I think all the domestic clothing listed companies are faced with the problem of breaking through this situation. To break through this situation, we must take international mergers and acquisitions, and change the competition pattern of international brands in China through integration. "

Yang Dayun said that now China's market is international brand competition, and domestic brands are internationally competitive. If you ignore this situation, it will be difficult for any of your acquisitions to compete with international brands in the next five years. But if you don't fight against them, they will be around you, and they will exert tremendous pressure on the market in the future. So I think domestic enterprises are very difficult.

"At the moment, I can't see how competitive brands can be formed by merging and integrating several enterprises in domestic enterprises," I can't see. Because I've been doing this job for more than 20 years, I know them very well, and I know how they start up. It's very difficult. Yang said.

He believes that the domestic brand mergers and acquisitions in different markets, the integration of time and cycle are very large, because the biggest difference between domestic enterprises and foreign enterprises is that many foreign enterprises have developed several generations, the history and culture of the brand is very deep, the details and processes of the products are very unique, but these family businesses have a feature that is lack of funds, lack of global marketing network, and lack of integration of resources.

"The merger and acquisition of foreign high quality enterprises is equivalent to a glass of water that is already full, and you can spill over if you just inject capital into it. But domestic enterprises often have half a glass of water, or even a little water at the bottom of the cup. How much water can you add to it after they are bought and sold, and the value of overflow will continue to develop. There are few such enterprises. " Yang Dayun said.