La Natsu Bell'S Declining Growth Is Not Sustainable.

La Natsu Bell has just announced 2014 fiscal year.

Sales increased by 25.5%, slightly below market expectations of 28%.

But net profit is less than expected 32%, an increase of only 23.7%.

The reasons for lower profit margins in the second half of the year are: 1) more new store opening fees in the second half of the year (287 stores in the first half of the 1216 stores in the second half of the year); 2) the new brand grows faster than the core products (rash and bell), but the profit margin is low; 3) there are more sales promotion activities in the second half of the year, and more vs sales of the over season products also drag profits.

Same store sales growth also increased from -3.4% in the first half of last year to 5.3% in the second half of the year.

Gross profit margins, operating margins and net interest rates fell by only 0.1% over the whole year.

New acquisitions enhance online sales performance

According to Euromonitor data, La Natsu Bell is in China.

The mass market ranked third, accounting for 5.3%.

The composite growth rate was 80% between 2012 and 2013.

Their online stores ranked twelfth and third respectively in the "double 11" and "double 12" sales in 2014.

The company also acquired the "seven grid", a pure online fashion brand, ranked eleventh in the "double 11".

The company expects the acquisition can lead and strengthen its online channels, but in this white hot market, it will be a difficult task.

The three haze is hard to grow.

We believe that high growth is unlikely to last. The reasons include: (1) sales are mainly driven by new stores instead of same stores.

The same store sales grew by 1.7% in 2014, while the number of stores increased by 27.9%.

The company will add 1500 new stores a year.

If the same store sales growth remains unchanged, growth will only come from new stores, which means that growth will slow down in the next few years.

Two) sales growth is driven by new brands, which are less profitable than the original core brands, thus affecting the gross margin.

Three) even with strong e-commerce performance, e-commerce still accounts for only 0.5% of revenue in 2014.

Valuations are reasonable but not attractive.

The company's current valuation is 9 times the expected price earnings ratio in 2015.

The industry is on the low side.