Through Financial Data, What Is The Truth That Engulfing BELLE'S Operating Profit?

Notice shows that

Operating profit decreased 32.2% compared to the same period last year, mainly because: 1., the profit of shoe business was slipped due to the shrinkage of revenue and gross profit margin; 2., the intangible assets of goodwill and other footwear related businesses were greatly reduced.

Once the shoe companies are facing the brand aging crisis, they are being taken the lead by sports and clothing that are more demanding in the market.

The announcement shows that the proportion of sports and clothing business has increased significantly, from 42.4% last year to 48.3%.

BELLE has turned over several times in the wave of pformation, and has rapidly expanded its brand through the acquisition and other means to intervene in the fashion industry.

As early as 2008, BELLE saw it.

Opportunities to accelerate the construction of online and offline channels.

"The group will not reverse its revenue and earnings in the next one or two years, so it is considering whether there is a need for a pformation.

If we do not pform, we will die slowly, but if we make fundamental changes, we will face great risks. "

In Belle International Holdings Ltd 2015/16 annual performance conference, BELLE CEO and executive director Sheng Bai pepper is not pessimistic.

He also said that this is the company.

For the first time in 9 years, I was sorry for the reversal of earnings.

According to the annual performance bulletin, as of February 29, 2016, BELLE group's revenue was 40 billion 790 million 200 thousand yuan, operating profit of 4 billion 201 million 500 thousand yuan, compared with the previous year by 32.2%.

In addition, equity holders should account for a 38.4% decrease in profits, a 4.9% increase in sales costs, a decrease in gross profit of footwear sector 10.1% and a 1.2% decrease in gross margin.

There are two main reasons for this. First, the operating profit of footwear business is declining due to the shrinkage of revenue and gross profit margin.

Secondly, the intangible assets of goodwill and other footwear related businesses are substantially reduced.

Behind the financial data, this China's biggest shoe retailer is "hanging over the edge".

What is eating BELLE's profits?

At present, BELLE group consists of two major branches, footwear business and sports and apparel business.

The private brand of footwear business mainly includes Belle, Teenmix, Tata, Staccato, Senda, Basto, Joy & Peace, Millie's, SKAP, 15MINS, SKAP and so on, and the agency brand mainly includes: ",", ",", "and".

Private brand mainly adopts vertical integration mode, including product research and development, procurement, manufacturing, distribution and retail.

The operation mode of agent brand is mainly brand agent and distribution agent.

Unlike footwear business, sports and apparel business is currently dominated by distribution agents, including front-line sports brands Nike, Adidas, two PUMA sports brand PUMA, Moussy, SLY and so on.

In mainland China, BELLE has 13762 shoe retail outlets, 20873 sportswear, and 144 self operated retail outlets in Hongkong and Macao.

It is worth mentioning that the sales of BELLE footwear business decreased by 8.5% compared with last year, mainly due to the same store sales fell by more than 10%.

At the same time, as part of the department store business adjustment or structural pformation, as well as BELLE's more cautious choice of channels, or even assess the closure, resulting in a slight contraction in the retail outlets of shoes, China's footwear retail outlets decreased by 366.

On the contrary, the sport and clothing business that its agent sells is fast growing because of the growth of the same store sales and the healthy expansion of the retail network.

The announcement shows that the income of footwear is down to 21 billion 74 million 200 thousand yuan from 23 billion 37 million yuan in the previous year, down by 8.5%.

Sports and clothing business revenue increased by 16.2% to 19 billion 716 million yuan.

In terms of gross margin and profit margin, the footwear industry is also not optimistic, with the former decreasing by 1.2% compared with the same period last year, and the latter from 22.1% to 18.7%.

Gross margins of sports and clothing increased by 1.9% compared with last year, and gross margins increased by 21.4%.

The announcement shows that the gross profit margin of footwear business and sports and clothing business is 67.3% and 44.5% respectively.

BELLE's explanation is that on the one hand, the weakness of demand side exceeds the market expectation; on the other hand, the warmer and later cold season in the early winter last year not only affected the sale of high price winter boots products at the beginning of the season, but also caused the overall sales discount and the overall discount of the season to be too large, which had a negative impact on gross margin.

However, in the next few years, if the sales of shoes and same stores remain low and the recovery is lower than expected, there will still be a possibility of a slow decline in some of these performance margins.

In addition, the impairment of goodwill and other intangible assets is another major reason for the weakening of footwear business.

The announcement shows that the total value of BELLE's intangible assets is 1 billion 356 million 400 thousand yuan, of which 1 billion 127 million 400 thousand yuan is goodwill and 229 yuan for intangible assets. 0 million yuan.

This is mainly due to the previous acquisition of Mirabell, Millie 's, SKAP and other business processes.

In contrast, there is little risk of impairment of goodwill and other intangible assets related to sports and apparel business.

Traditional footwear goes away in spring, and sportswear is used to fight fires.

BELLE's announcement shows that there are three main reasons for the current difficult situation: first, the change of consumer's product style preferences; the traditional fashion and the formal shoes are becoming marginalized in the past two years; sports and leisure styles dominate the trend.

Two, the evolution of retail channels has made a huge impact on footwear businesses, such as department stores, which attract rich food and entertainment, and attract low price consumers.

Three, the whole industry is limited by channel mode, production process and so on. It has not yet been able to find suitable ways to effectively enhance the performance price ratio.

BELLE is not the only one in distress.

According to Daphne International's 2015 earnings report, the net loss was HK $379 million for the year, and net profit decreased by 315.24% compared to the same period last year, the first loss in nearly ten years.

In 2015, Daphne closed 805 stores one after another. At the same time, the 2015 annual report on Saturday showed that the operating income was 1 billion 642 million yuan, a decrease of 6.60% compared with the same period last year, and the net profit attributable to shareholders of listed companies decreased by 37.32% compared with the same period last year.

Once the shoe companies are facing the brand aging crisis, they are being taken the lead by sports and clothing that are more demanding in the market.

The announcement shows that the proportion of sports and clothing business has increased significantly, from 42.4% last year to 48.3%.

However, BELLE pointed out that the change in the proportion of business mainly reflects the changes in the style of the consumer market, not from the directional adjustment of the group.

Combined with BELLE's historical data and public information, in the first half of 2008, sports and clothing business accounted for more than 48% of the total revenue. Before and after 2009, the Chinese sportswear industry had experienced a sharp decline in sales and sales, and gradually dropped back to about 36% in 2012. It did not recover until the second half of 2012.

The rising proportion of sports and clothing business has a certain degree of impact on BELLE's comprehensive financial and operational indicators.

In terms of business mode, sports and apparel business only involves distribution and retail links, while footwear business is a full value chain mode. Therefore, profitability, including gross margin and operating interest rate, is significantly lower than that of footwear business.

This is not a good thing for BELLE.

The benefits are also obvious.

On the one hand, the stock turnover of sports and clothing business is faster than that of footwear business because it does not involve in manufacturing.

The bulletin showed that BELLE's average stock turnover days were 135.7 days, a slight decrease of 3 days from the previous year, of which sports and clothing business inventory turnover days dropped nearly 10 days, while footwear business increased by 18 days.

Group inventory increased 8.3% to 6 billion 877 million 400 thousand yuan over the same period last year.

On the other hand, the store format and location of sports and clothing business are also different from those of footwear shops. The department stores usually have a higher floor, larger shops and a higher output of single stores. Therefore, the franchise fees of shopping malls are relatively low, and the proportion of wages is slightly lower than that of footwear business.

Announcements showed that in the overall weak channel environment, sports and clothing business still maintained a relatively fast opening schedule, with 682 new net outlets in the year, a net increase of 10.6%.

There are three main reasons: 1., the demand for sports products and sports brands is relatively strong, and the market share of sports category products is expanding.

2. sports and clothing business channel mode is relatively diversified, opening shop selection is more flexible, and footwear business still relies mainly on department stores channel.

3. the development of brand and market segmentation brand of second-line sports has increased, and the new garment business has maintained a good growth momentum.

BELLE pointed out that in the long term development direction, it will maintain active involvement in footwear, sports, fashion accessories and other fields, reduce risks through different configurations, and seize the opportunities of development.

"Turning over several times" in the wave of pformation

Starting from a small foundry factory, BELLE has turned over several times in the past more than 20 years in the wave of pformation, and has rapidly expanded its brand through the acquisition and other means to intervene in the fashion industry.

And with many brands exploring the line, at the same time, as early as 2008, BELLE saw the opportunity to accelerate the construction of online and offline channels.

From the perspective of e-commerce, BELLE has experienced the development path of "brand online - single product platform - vertical variety diversification".

BELLE is an earlier group of traditional brand companies that set up flagship stores in Tmall. At the same time, BELLE set up e-commerce warehouses and gradually opened up the channel platforms such as Dangdang, Jingdong mall and fan Kong V+.

In addition, BELLE has launched the B2C website of its own footwear brand, "Tao Xiu net", which is equivalent to the brand official e-commerce website.

At that time, Xie Yunli, director of BELLE electric business, said in an interview with reporters that BELLE had hoped to have a unified operation of multiple platforms at the initial stage of BELLE's multi-channel operation, that is, B2C platform was only the source of BELLE's orders, and all the goods were issued by BELLE's e-business store.

The disadvantages began to appear. Under this mode of generation delivery, BELLE electricity providers need to order and stock in advance each year, so the docking of the system with the warehouse is very difficult.

At the same time, good shoe, shoes and other shoes vertical B2C business providers have been financing.

In July 2011, BELLE founded the excellent shoe online shoe city, began to take the online platform business route, and started from BELLE's brand and its proxy footwear brand to expand to other footwear brands and clothing categories.

At that time, CMO Xu Lei explained to the media the reasons for the expansion of clothing products: "clothing products are bigger than shoes market."

The sales data about the excellent purchase network were not mentioned in the announcement, and the business condition could not be estimated.

In addition, in July 2015, excellent purchase network opened "excellent purchase Seoul station", joined the ranks of cross-border electricity providers, category is also further expanded, the official website shows cosmetics, maternal and child, sports outdoor, bags and so on.

Cooperation with Baroque is called BELLE's first step in fashion clothing category.

In August 2013, BELLE announced that its Affiliated Companies Pu Guan spent about HK $732 million to acquire about 31.96% stake in Barok Japan, and one of BELLE's shareholders, CDH investment, also acquired 23% stake.

BELLE has set up a series of joint ventures with Barok, another Affiliated Companies Zhucheng limited, to develop garment and accessories business in China.

After the acquisition, BELLE valued its advantages in fashion research and development, brand and supply chain. After its cooperation, Barok's business in China has changed from deficit to surplus.

Meanwhile, BELLE has recently reached a strategic cooperation agreement with Italy's high-end fashion cowboy brand REPLAY, which is responsible for developing the brand's business in Greater China and taking the opportunity to cut into jeans.

The clothing market is becoming increasingly fragmented and fragmented. By introducing new brand and new business multi brand strategy, BELLE will lay out multiple market segments, and first develop and expand according to the specific development stages of different brands.

When a single brand reaches a certain size, it will no longer focus on the extension growth, but will deeply intervene in the localization product development and supply chain integration so as to achieve the maximization of brand quality and value.

Behind the brand and channel advantages, BELLE's behemoths are also tied up by some brands, which is particularly evident in the past year.

As mentioned above, BELLE needs to make a large depreciation account of 1 billion 356 million yuan for Mirabell, Millie 's, SKAP and other brands acquired in recent years. The evaporation of goodwill and intangible assets has led to a direct decline in profits.

In addition, BELLE has also been "dumped" case, in 2013, Italy men's shoes brand GEOX will not renew its contract with BELLE after five years' agency.

Public information shows that BELLE's proxy brands such as Nike and Adidas continue to grow year after year, whereas self owned brands and acquisition brands fail to achieve good market performance.

At the same time, Cheng Weixiong, general manager of Shanghai Liang Qi Brand Management Co., Ltd., told the media before, "the reason why BELLE can achieve today's status is mainly based on the formation of merger agents. Based on the" general agent "mode, it is lack of in-depth excavation of retail business.

Seize the current sports and leisure draught, as a big business agent, BELLE may rely on the steady development of the apparel business to save a fire for the overall business, but its core business is always footwear, and still needs to expand around this business in the future.

Therefore, to become a self owned brand as a retailer or a good agent to pform into a channel business? It seems that BELLE will be in the game of pformation this year.