Why Does It Lose Tens Of Millions Of Big Customers?

In January 24th, the public pfer instructions for Decathlon, Anta, Pathfinder and other sportswear brands were commissioned.

In February 20th, star clothing was officially launched.

Star clothing is a large-scale manufacturing enterprise specializing in garment processing. Famous outdoor sports brands such as Decathlon, Anta and Pathfinder are its main customers.

But the public pfer instructions showed that the net profit loss of Star clothing reached 11 million 890 thousand yuan in the first half of 2016.

After in-depth investigation, it is found that the loss of Star clothing may be temporary and accidental, but its performance is like a miniature of the OEM factory in China: it relies on cooperation with big brands, has no independent research and development capabilities, and has a single product structure and a weak profit.

Industry competition is still fierce, costs are also rising, OEM enterprises appear passive.

Where is the road of pformation?

Star clothing is a traditional sportswear OEM factory, stable orders, why in the first half of 2016 profit loss tens of millions?

According to the public pfer instructions, the operating income of Star clothing in 2014, 2015 and 2016 1-6 months were 230 million yuan, 270 million yuan, and 80 million yuan respectively, and the consolidated gross profit rate of the company was 8.99%, 10.90% and 12.98% respectively, and the gross profit rate of each period was generally stable, showing an upward trend.

In 2015, star clothing expanded production capacity, from the original 48 production lines to 60, the sales volume has increased.

But capacity improvement has not improved its core competitiveness.

But from the net profit perspective, the net profit of Star clothing in 2014, 2015 and 2016 1-6 months was 5 million 990 thousand yuan, 11 million 880 thousand yuan and -1189 yuan respectively.

In the first half of 2016, the trend of profit growth was broken, resulting in a marked loss.

From the public pfer instructions, we can see that there are two main reasons for the loss: first, the first half of the year is the low sales season of the company, which directly affects the profitability; secondly, the star clothing has to issue 11 million 520 thousand new shares to the 46 natural persons such as Zhang Jun, the management of the company in order to retain talent.

The 17 million 49 thousand and 600 yuan of share payment involved has resulted in large non recurring gains and losses.

Although net profit losses do not cause substantial effects, there are crises in the business mode and industry background of star garments.

At present, there are four main risks.

The cycle of product and product production of Star clothing has distinct seasonal characteristics, and the product sales period is ahead of one or two quarters.

And its main outdoor sportswear clothing sales are seasonal, usually in the third and fourth quarter as the selling season.

According to past data, the proportion of the company's revenue in the first half and the second half of 2014 and 2015 was 29.02%, 70.98% and 23.07%, 76.93% respectively.

According to the data of 2014 and 2015, the main products of Star clothing were down garments, the sales amount accounted for 46.25% and 55.85% respectively, while the down sale in the first half of 2016 accounted for only 17.68%.

This directly affects the profitability of the first half of 2016.

At present, China's demographic dividend is gradually subsiding. With the increase of wage level and the improvement of social security system, the cost of employment of textile and garment OEM and ODM enterprises has gradually increased.

In addition, since 2008, the prices of raw materials for garment enterprises have also been on the rise.

The rising cost of labor and raw materials has made the manufacturing cost of clothing products rising and operating pressure increasing.

In the cost structure of Star clothing, the main business cost is mainly composed of direct materials, labor costs, commission processing fees and manufacturing costs.

In 2014, 2015 and 2016 1-6, the cost of direct materials was 48.71%, 42.70%, 38.58%, respectively, and the labor costs were 42.38%, 47.72% and 48.82% respectively, increasing year by year.

As of July 31, 2016, there were 2308 employees in the company.

The large number of labor needed in the production process brings some pressure to the cost of Star clothing.

The public pfer instructions show that the company mainly provides clothing and apparel processing services for the famous outdoor sports brands such as Decathlon, Anta and Pathfinder, through the OEM mode.

In 2014, 2015 and 2016 1-6, the total business revenue of the top five customers accounted for 99.94%, 99.96% and 100% of the current main business revenue respectively.

Among them, with the cooperation of Shanghai Xinwei Sports Products Co., Ltd. of Decathlon brand Co., Ltd. since 2009, orders for 2014, 2015 and 2016 1-6 accounted for 51.63%, 49.22% and 73.36% of the total orders respectively.

At the end of each reporting period, the balance of accounts receivable was relatively large, mainly due to the fact that the credit sale period of the company was 60 days for Shanghai Xinwei Sports Products Co. Ltd., and the accumulated accounts receivable balance was larger due to the account period not yet settling to the end of the corresponding reporting period.

At the same time, the advance payment in June 30, 2016 increased substantially, mainly due to the signing of an order of about 90 million yuan with Anta Sports Products Group Co., Ltd., OEM.

Since 2001, China's outdoor goods market has experienced a period of rapid development and consumer groups are expanding. According to the annual outdoor products market report released by COA, from 2001 to 2010, China's outdoor products industry has a compound growth rate of over 60% over the past 10 years, and the market size in 2015 has reached 18 billion yuan.

According to the world clothing and shoe net, there were 1.5 enterprises in China's textile and clothing industry in 2014, and the total assets of the enterprises amounted to 1 trillion and 200 billion yuan, up 9.84% over the same period last year.

The scale of sales revenue was 2 trillion and 100 billion yuan, an increase of 8.22% over the same period last year.

The total profit of the industry increased year-on-year, 39.38% in 2010 and 4.96% in 2015.

Visible competition in the industry is fierce, profit margins are limited, and total profit growth is slow.

Generally speaking, star clothing is stable and profitable, and the order resources are still available. But on the other hand, star clothing still has obvious shortcomings.

For example, star clothing has no independent research and development capabilities. The main business revenue of the company comes from the sales of OEM products. Its product structure is single, and its profit products are single. It relies heavily on the sale of down garments and is closely linked to annual income.

In addition, the company mainly solves the financing problem through its own operation accumulation and bank loans, and the financing channels are relatively simple.

The cost of bank financing is relatively high, which can not meet the long-term capital needs of the company's development, and is not conducive to the long-term development of the company.

In the light of the current situation, the star clothing mentioned in the public pfer instructions that for future development needs, it will upgrade in the following four points, trying to break the OEM enterprise's single Competitiveness:

At present, star clothing is still lack of clothing design talents, and it is difficult to form an independent design template. Therefore, it is trying to introduce design talents from outside to improve product design and product production capabilities, so as to enhance the added value of products.

At present, there are 60 generation processing lines for star clothing, with an annual capacity of 5 million, which can no longer meet the production needs of customers. Therefore, it is planned to increase the capacity of 50% in the next three years, and ensure the total profit of the company through the increase in output.

4, shape enterprise culture and increase enterprise cohesion.

At present, the company's production staff reaches 2199 people, accounting for 95.28% of the total number of employees. Effectively improving corporate culture and enhancing enterprise cohesion is an effective measure to reduce employee turnover. At present, the company will improve staff's sense of belonging through a series of rules and regulations, avoid staff turnover and ensure stable development of enterprises.

More interesting reports, please pay attention to the world clothing shoes and hats net.