"Back To 8 Billion" Lining'S Strong Recovery, The Potential Side Is Also A Crisis.

From this article, you will see the following points:

The growth of local brand traditional retail business is weak.

"Multi brand" looks beautiful, but the success rate is very low.

Children's clothing may become the winner of the next phase of the domestic market.

The number of stores in the four major domestic brands has declined, and the retail competition has been heated.

"Return to 8 billion", Lining has strong recovery, and the other side of potential is also a crisis.

FILA has been close to a separate brand in the Chinese market.

Chinese brands are actively focusing on overseas layout, but there is no real way to expand the outcome.

First, from "one super strong" to "polarization".

According to the world clothing shoes and hats net, in 2016,

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XTEP,

The four companies achieved a total sales of 31 billion 780 million yuan, up 13.63% from 27 billion 969 million in 2015.

However, at this growth rate, only one Anta outperformed the average and went far beyond. The other three (Lining 13.1%, 361 12.6% 12.6%, XTEP 1.9%) were significantly less in volume or growth rate.

In gross margin, the gross profit margin of the four brands was 14 billion 605 million yuan, with an average gross margin of 46%, of which Lining (46.2%) and Anta (48.4%) were above average, while XTEP (43.2%) and 361 (42%) were below the average.

The total net profit of the four brands was 3 billion 960 million yuan, a 23.9% increase over the 3 billion 196 million yuan in 2015.

Although a Anta company has taken up more than 60% of the total net profit of the four brands, the biggest increase is Lining, which surged from 14 million yuan in 2015 to 643 million yuan in 2016.

XTEP (528 million yuan) and 361 degree (403 million yuan) both have a two digit year-on-year decline compared with the previous year.

In 2016, XTEP's net profit dropped from 623 million yuan to 528 million yuan, down 15.2% compared with the same period last year.

For this decline, the official explanation given in its annual report is "mainly due to the restructuring and adjustment of XTEP's children's business and the provision for trade receivables, which was recorded at RMB 222 million yuan (31 million 700 thousand yuan in the same period of 2015)", but the details of XTEP's child business restructuring and related financial data were not disclosed.

However, apart from the decline in net profit caused by the restructuring of children's business, the decline in XTEP's sales growth has also affected this.

In 2016, XTEP's annual sales volume was 5 billion 396 million yuan, an increase of 1.9% over the same period last year. This growth index remained at 6% when the semi annual report was released.

As a matter of fact, XTEP, which saw only one digit sales growth alone, had lagging behind in the first half of the year, but its growth rate was only slightly smaller than that of other households, and its 380 million net profit after Anta did not appear unsightly.

But according to the annual report data, in the second half of 2016, XTEP's revenue was 2 billion 861 million, down 125 million from the same period in 2015, a decrease of about 4.19%.

In the first half of 2016, the five largest domestic brands listed in Hongkong were negative sales growth in PEAK, and sales of 1 billion 298 million yuan were 6% lower than that in the same period in 2015.

Soon after, PEAK opened its privatization from the Hong Kong stock exchange.

Therefore, we did not include it in the 2016 annual earnings report.

The days of 361 degrees are not so good.

Its revenue in 2016 was 5 billion 23 million yuan, an increase of 12.6% over the same period last year.

The growth rate remained at two digits, but net profit was only 403 million yuan, down 22.2% from the same period last year.

The company's earnings report did not give a direct reason for the decline in net profit.

On the day of the announcement of the earnings report, in March 14th, the stock price of 361 degrees dropped 4.42%.

Similarly, the focus was on the second half of 2016, with a 361 yuan revenue of 2 billion 467 million yuan, an increase of 9.45% over the previous year, or a tightening of more than 6% over the first half of the year. The absolute value of revenue was 3.48% lower than that in the first half of the year.

Of all 4 companies, 361 is the only one earning less than the first half of the year.

If the decline in net profit is not so terrible, the narrowing of turnover is undoubtedly a very bad signal.

Similarly, in the second half of 2016, the two leading companies maintained a good momentum - Anta achieved 7 billion 203 million yuan in revenue, up 19.73% from the same period last year, slightly lower than 20.21% in the first half of the year. Lining's revenue in the second half of the year was 4 billion 419 million yuan, up 13.25% over the same period last year, slightly higher than that in the first half of the year.

In only half a year, the 4 major domestic sports brands listed in Hongkong (the first half or the 5 largest) have completed the pformation from "one super strong" to "polarized".

The first echelon composed of Anta and Lining and the second echelon composed of XTEP and 361 degrees have shown different development trends.

As for PEAK, I am afraid it has left behind six months ago in strict sense.

Two, the "doorway" in the store

In terms of store construction, the four brands have different choices.

361 annual report shows that in 2016, 361 core brand new stores opened 970, closing 1821, and the total number of stores decreased from 7208 to 6357, with a reduction of 11.81%.

In addition, the sales outlets of 361 degree children's wear products also decreased from 2350 at the end of 2015 to 2000, with a reduction of 14.89%.

In the semi annual report of 2016, the total number of XTEP retailers decreased from 7000 at the end of 2015 to 6800. In the annual report, there was no change in the figure, of which 40 exclusive distributors operated about 3800 shops, and authorized dealers operated about 3000 shops.

In addition, with the overall restructuring of XTEP's children's business, sales of XTEP children dropped from about 600 in 2015 to about 250 - only 361 of 1/8.

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On the other hand, Lining and Anta still maintain growth in the number of stores.

As of 2016, 13, 31, Lining had 4829 franchisees, an increase of 4.6%, 1611 outlets, an increase of 6.3%, and Anta stores (including Anta children's independent stores) increased from 8489 to 8860, an increase of 4.37%.

On the whole, the number of four domestic sports brand stores in 2016 did not increase.

The expansion of the proportion of electricity providers can explain this problem from one side, but the saturation of target consumer groups is also an unavoidable topic.

Due to the high positioning rate and the high coincidence rate, the domestic brands are touching the ceiling developed by the main brand users.

By contrast, the price and consumption group is slightly better than the other three Lining.

On the other hand, the number of stores to a large extent reflects the development of offline retail market, which is being fiercely fought.

In fact, the annual report of four companies combined with "retail" is a very high reference rate in 2016.

The following are the four major brand annual reports on retail:

Lining:

Establish a system of identification, evaluation and training for retail and product talents to support the company's strategic direction to enhance product operation capability and retail operation capability.

Promote the construction of retail operation support platform, and continuously enhance the profitability of terminal sales point;

Optimize the overall retail business mode, and ultimately enhance the profitability of the retail terminal.

Anta:

Optimize the retail network and increase the proportion of Anta stores.

In order to seize market opportunities, all brands of the company adopt omni-directional retail oriented measures.

Strengthen store efficiency and management to meet consumer demand through a full channel strategy.

361 degrees:

In the future, the group will continue to focus on improving the efficiency and profitability of the stores.

Continue to implement the retail orientation strategy to help our distributors and franchised retailers maximize profits and promote store efficiency.

XTEP:

The retail channel should be flattened.

Retail channel providers, e-commerce and offline retail growth complement each other, and the two retail channels cooperate closely.

Continued emphasis on effective retail channel management is the key to success.

As the largest population in the world, China is considered to have the world's most extensive sports footwear market.

In the past a long time, this market has been regarded as "inexhaustible", and there is a great potential for development.

However, after the rapid growth of domestic brands in the past few years and the continuous influx of international brands, the potential purchasing power to be excavated has been little left for most domestic brands, and even the existing market cakes are faced with more players and cicadas.

The ceiling effect, which is gradually showing after the bottom of the potential, will be first reflected in the relatively single, weaker and weaker brand of the profit model, and gradually expand its scope of influence.

In the first half of 2016, PEAK first hit the wall, showing a decline in turnover. By the second half of the year, XTEP and 361 degrees were also affected to varying degrees, and some of the annual reports fell.

In fact, if we can not develop more room for growth, and in the increasingly fierce competition of overseas brands and the retail market, Anta and Lining will have the same problems in the future.

Three, behind the prosperity of Felix

How does a company break through the main brand ceiling? A recognized solution in the sports industry is multi brand management.

At present, Anta is doing the best on this road, but if we look at the whole industry, we will find that behind the prosperity of FILA is a very low survival rate of new brands.

After 2016 half a year's announcement, Anta's vision is "to become the first Chinese sporting goods company with brand reputation and market share in the Chinese market, and become a respected, sustainable world class sporting goods company in the long run".

When the 2016 annual report was released, it was replaced by the "respected world-class multi brand sporting goods group".

Accordingly, the company's values have also been upgraded from "brand supremacy, innovation and change, focus on pragmatism, honesty and gratitude" to "consumer orientation, focus on pragmatism, pcendence of innovation, respect and tolerance, honesty and gratitude". Apart from increasing respect and tolerance, the most significant change is to change "brand supremacy" into "consumer oriented".

These two changes are not only limited to Anta, but also a microcosm of the whole Chinese sports shoes and clothing market.

As the industry leader, Anta has repeatedly emphasized the management mode of single focus, multi brand and all channels in its semi annual and annual reports in 2016.

In Anta's most important multi brand strategy, the Fiat China business, which was acquired by the end of 2009, is becoming the most powerful driving force for the company's growth.

"Multi brand" is not a new concept. Lining acted earlier than Anta. They got the right to operate Italy brand in Lotto in 2008, and Anta reached a cooperation with Fiat in 2009.

However, after seven or eight years of operation, by 2016, the business of Lotto and Felix in the Chinese market has not been in the same order of magnitude. According to the annual earnings report, the total revenue of several brands including Lining, Kasen (Kason) and Aigle (Aigle) is 89 million 854 thousand yuan, accounting for only 1.1% of the total annual income of the company.

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Among all the brand attempts of all domestic sports brands, Anta is the most committed, the most resolute and the most productive.

Although Anta did not announce the total revenue of fie brand in its annual earnings report, but in August 2016, when Anta released its first half financial report, Ding Zhizhong said that the proportion of FIE's income has reached 20% of the group.

In the first half of 2016, the total revenue of Anta was about 6 billion 140 million RMB. According to Ding Zhizhong 20%, the total revenue of Fiat business was more than 1 billion 200 million yuan. Another domestic brand, the famous bird in the first half of 2016, had a total revenue of 1 billion 20 million yuan, and the first half of PEAK's withdrawal from Hong Kong stock was 1 billion 298 million.

According to the news, Fei Le brand (including fie children and electricity supplier sales) should earn around 3 billion yuan in 2016, which has exceeded the number of independent sports brands in China.

In the success of Fiat, Anta has made a comprehensive layout in the multi brand strategy.

In 2016, Anta and Japan's high-end sports brand Desanto (DESCENTE) reached a cooperation; in 2017, on the same day on the 2016 earnings announcement, announced that South Korea KOLONSPORT joined the Anta family.

Besides the Anta and Lining, 361 degrees also carried out many brand attempts.

In October 2013, it reached a strategic cooperation with Nordic outdoor brand OneWaySport to develop the Greater China market in 361 degree.

According to the 361 degree annual report, as of December 31, 2016, there were 58 ONEWAY self operated stores in China, most of which were located in famous shopping malls.

ONEWAY shops will continue to open in the future to lay a solid foundation for rapid development.

However, 361 degrees did not disclose specific information about the sales of ONEWAY brand in the past year in the annual report.

XTEP, the only company without multiple brand attempts, also mentioned in its annual report this year that "the group will continue to explore opportunities for acquisitions and business cooperation with international sporting goods brands to increase shareholder returns."

The good performance of Fei Le not only brings huge profit growth space for Anta, but also gradually becomes the main engine of Anta's overall gross margin.

After 2015 or 2016 years of significant growth, Anta's gross profit margin increased from 45.1% in 2014 to 48.4% today. Do not belittle this 3.3% growth. In 2016, the sales volume of lululemon, an American fitness brand similar to that of Tongan, was 2 billion 344 million yuan (about 16 billion 171 million RMB), and its gross profit margin was only 51.2%, which was less than 3 percentage points from Anta.

However, behind the high margin that Fei Le brings, it also makes people worry whether the gross profit margin of Anta's brand has gone up.

In 2016, the gross profit margin of Anta footwear products increased by only 0.1% (46.2% to 46.3%), while the gross profit margin of clothing products rose from 47.8% to 51%, or 3.2%.

As for the different trends in the gross margin of footwear and clothing, the explanation given in the annual report is that the overall gross margin of the group increased in 2015 in the current financial year because of the successful implementation of multi brand strategy.

As the contribution of FILA business has increased, the impact of some products and products with superior price performance and superior footwear products has been offset. The gross gross profit margin of footwear has increased by only 0.1 percentage points.

On the other hand, as the contribution of FILA business has increased, the gross gross profit margin of clothing has increased by 3.2 percentage points.

It can be seen that in this year, the gross profit margin of Anta's main brand shoes category should be in a downward trend. With the contribution of the Fiji brand, the gross profit will be pulled back to a slight increase of 0.1%. On the other hand, the gross profit margin of the clothing category will grow by 3.2% a year, and the gross profit margin of 51% will reach the level equal to that of Lulu lemon.

Further analysis can be made from this data. The gross profit rate of fiel clothing business should not only be 51.2% higher than that of Lulu lemon, but also much higher than that of Lulu lemon, so that in the whole Anta brand, it will account for about 20% of the total body weight and pry the whole clothing category to achieve the same gross profit level as Lulu lemon.

At present, Anta maintains an annual revenue growth of 20% and a gross margin of over 1%, which is a fairly high standard.

Whether the future can be maintained depends largely on the continued growth of frantic brands and the growth rate of Anta's brand. At the same time, the brand can not maintain a clear decline in its current level.

Four, who is the next leader?

In 2016, the old leader Lining fought a battle. The most important point is that the ceiling of Lining's own brand is not obvious compared with the three big Jinjiang brands.

In addition, Lining specifically mentioned the specific proportion of electricity business and growth rate in the earnings report, highlighting their confidence in this sales channel.

In 2016, Lining's sales revenue was 7 billion 925 million yuan, a steady increase of 13.7% over 2015. Lining accounted for 98.9% of the total sales revenue. In all sales areas, China accounted for 97.4% of the total sales.

It can be seen that the income of Lining brand is highly concentrated in the "brand" and "Chinese market". Such a set of data can be interpreted from two perspectives:

From a negative perspective, Lining now performs poorly in two aspects: multi brands and developing overseas markets. Income is too dependent on the brand and the Chinese market. If the main brand sales hit the ceiling, there is no effective way to develop new markets.

From a positive perspective, this data shows the market potential of Lining's brand and the future potential of the whole group. If it can develop better for many brands and overseas markets, Lining will have the strength to re challenge the status of Anta's domestic brand leader.

In fact, Anta has always regarded Lining as the biggest potential rival, especially after the 2016 earnings report, and this sense of crisis may start to become more urgent.

Take the 2016 revenue data as an example, if we do not calculate the income of overseas brands such as Fiat, the total income of Anta Department (Anta + Anta children) will be around 10 billion RMB; Lining's other brands account for only 1.1%, and the income of the Lining Department (including Lining young people and spring labels) is close to 8 billion yuan level, so that the small gap has already won't be ignored by Anta.

At present, Lining is still in the process of brand recovery. In the 8 billion of the revenue, if we get rid of the 313 million net proceeds from the 10% equity interest in the sale of red double happiness, the net profit is only 330 million, and the net interest rate also falls to 4.1%. Whether the absolute number or net interest rate is lower than that of XTEP and 361 degrees, the difference is even greater than that of Anta with net profit of more than 2 billion 300 million.

But in the long run, the gross profit margin of Lining products is more than 3 percentage points higher than that of XTEP and 361 degrees.

However, despite the good momentum of recovery, it is also a difficult task for Lining to develop more profitable space.

In October 2016, Li Ning Co announced that it will join the US professional dance brand Danskin to operate the brand in mainland China and Macao.

It shows its expectations and ambitions for multi brand businesses.

Annual report shows that Lining expects to open 5-10 Danskin pilot stores in the core business district of super large and first tier cities in the second half of 2017, and steadily expand the target market.

However, according to the current operation of the brand of Lotto and AI Gao, it is not easy to make Danskin into Lining's version of FIE, at least not overnight.

So far, overseas brands have not yet been acquired to develop new markets, and XTEP has chosen another way to deep plough in the field of running.

In 2016, XTEP sponsored or held 44 running events to become the official Chinese marathon official partner approved by the China Athletic Association. Its name is sponsoring the Beijing Olympic Forest Park. Its official run group has registered more than 43000 people.

In XTEP's 2016 earnings report, "running is the core sport category that the group focuses on" and "further enhancing the image of" the preferred brand of Chinese runners "can be seen in XTEP's position and importance in the running market.

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In addition, XTEP has invested a lot in football category, including signing Shevchenko and sponsoring the Futsal League for college students.

Like running, XTEP is trying to build its leading position in the domestic brand of football.

The emphasis on running in football is also reflected in sales. According to the annual report, XTEP shoes income in 2016 was 3 billion 525 million yuan, accounting for 65.3% of the total income, and clothing revenue was only 1 billion 765 million, accounting for 32.7% of total income. Clothing revenue accounted for more than 30 percentage points less than shoes, almost half of shoes.

Other brands of clothing and shoes sales of two large pieces of sales revenue is not such a big gap, the biggest difference between Anta, only 6.6%, Lining and XTEP are 5% up and down.

Relatively speaking, XTEP's strength and income are the most concentrated among the 4 major brands. Running is the most important brand gene of XTEP, and shoes account for 2/3 of XTEP's revenue.

This pattern can concentrate on a breakthrough from the premise that the overall volume is not dominant, but the whole brand is also restricted by a single category.

In addition to continuing to seek growth in the Chinese market through multiple brands, there is another way to expand revenue, that is, to use the brand to open up overseas markets.

In 2016, 361 degrees focused on overseas markets.

But in general, the development of domestic brands to overseas markets is still in the exploratory stage.

361 degrees, through its brand 361 degree international to expand overseas market business.

With the help of Rio Olympic Games and Rio Paralympic Games, the sales volume of overseas business in 2016 was 361 yuan to 80 million 700 thousand yuan, up 80.54% from 44 million 700 thousand in 2015, accounting for 1.6% of the group's annual income.

The annual report also shows that as of December 31, 2016, Brazil, the United States, Europe and China Taiwan had 1017, 264, 67 and 20 sales outlets of multi brand sporting goods shop selling 361 degree products.

In the first half of 2016, among the 5 domestic sports brands listed in Hongkong, PEAK was the most widely distributed and the largest proportion of revenue in mainland China.

Half a year report shows that in Asia, other regions, Europe, Africa, South America, North America and Oceania, a total of 296 million of revenue, accounting for 22.8% of the total income.

From this point of view, no matter the absolute number or group income ratio, the 361 degree overseas market has a certain gap from the then PEAK.

As an old Chinese sports brand leader, Lining has long tried to open up overseas markets.

In 2016, its total revenue in the international market was 206 million 500 thousand, accounting for 2.6%.

Anta signed the world boxing champion Pacquiao in 2016, and has the potential to make efforts in overseas areas such as Southeast Asia.

Compared to overseas markets that have not yet brought massive returns, children's wear is an important part of the 361 degree group's income. Similarly, children's clothing is also the largest stock gold mine in the domestic sporting goods market.

As of December 31, 2016, a total of 2000 outlets were offering 361 degree children's clothing products, of which 921 sales outlets were included in the 361 degree core brand authorized retail outlets.

The 606 is the independent Street shop.

By region, 67.5% are located in cities with three lines or below, 11% are located in first tier cities, 21.5% are in second tier cities, and the proportion of stores in the second tier cities is slightly higher than that of 361 degree core brands.

In 2016, 361 yuan children's clothing income was 651 million yuan, the growth rate was 10.6%, accounting for 13% of the whole group's turnover.

Annual report data show that the annual sales volume of children at 361 degrees is increased by 14.9%, and the average wholesale price has dropped by 3.8%.

Lining also attached enough importance to this field. In the second half of 2016, he began to redesign the future development strategy of the original Lining children's clothing brand LI-NINGKIDS.

The new children's clothing aims at the target group of 3-12 year olds, and on the basis of retaining the original LI-NINGKIDS, it focuses on the introduction of Lining's youth brand logo:LI-NINGYOUNG.

Unlike other brands, Anta has FILAKIDS in this area besides Anta children, and FILA corresponds to the relatively high-end market.

Compared with other domestic brands, Anta has the same importance in the children's market. At the same time, its product line is wider and the overall volume is bigger.

XTEP's data in 2016 were not so good looking, and had a great relationship with its restructuring of XTEP children.

This year, XTEP children's storefront decreased from 600 to 250, and its sales share also decreased from the number of units in 2015 to the low single digit number in 2016.

In addition, the provision of $222 million for XTEP children's trade receivables has a direct impact on its net profit.

At present, XTEP's main force in the 4 major domestic brands is the most concentrated, or single, XTEP needs to restructure the children's clothing business to revitalize the market performance in this field and develop more profitable points for the whole brand.

Five, conclusion

Just like the previous emphasis on retail, the four brands have almost mentioned the need to enhance store efficiency and user experience to strengthen the retail market in the light of future prospects.

With more international brands invading and sinking, and fashion brands opening up the environment of sports products market, for domestic sports brands, keeping the existing sites in 2017 may be a more difficult task than seeking new revenue growth points through multi brand strategy, children's clothing and overseas markets.

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