Sharp Improvement In Profitability Is Still Not Expected.

According to the world clothing shoes and hats net, from Lifeng The company's Global Brands Group Holding Ltd., 0494.HK, announced that its 2017 annual performance showed a sharp improvement in profits, but analysts believe it has not yet reached the expected level. brand (0787.HK) the stock price fell more than 30% in early trading today, with a low HK $0.79.

In the latest research report, HSBC Holdings PLC, HSBC Holdings, pointed out that although the profit of the brand in the fiscal year ended March 31st increased by 11.6% to 3 billion 891 million US dollars, which was in line with the bank's expectations, however, because the expenditure on brand integration saved less than expected, the adjusted core business profit was 25% lower than the bank's forecast, and the retail market in the United States was still depressed and the BCBG Max Azria Group LLC acquisition of the US bankrupt women's retailer might oppress the profit rate in the short term, so the bank lowered the rating of the brand (0787.HK) from "buying" to "holding".

Last year, the brand realized its core operating profit of 173 million US dollars, an increase of 64.5% over the previous year's US $105 million. EBITDA increased by 26.3% to $380 million annually. Net profit rose to 89.4%, up from US $47 million in the previous year to US $90 million, adjusted net profit to US $72 million, or 49.4%.

The brand last week bought us bankrupt women's clothing for $23 million. fashion Retailer BCBG Max Azria

In terms of revenue, the two largest business categories were 3.9% and 5.6% growth in children's wear and footwear and accessories, with incomes of $1 billion 603 million and $1 billion 281 million respectively; brand management increased 75.7% to $188 million; men's and women's fashions were increased by 31.5% to 820 million dollars, driven by business growth and new brands such as Kenneth Cole, Bebe and BCBG.

For the development plan of BCBG Max Azria Group LLC, which was purchased by US brand management company Marquee Brands LLC for 9 US dollars this month, the chief executive officer and vice chairman of the brand, Bruce Rockowitz Yue Yu Min, at yesterday's performance press conference, said that hundreds of Posts would be added to the United States to rebuild the LLC brand. On the Bloomberg TV interview, he pointed out that there are many high-quality brands such as BCBG that have been dragged down by a huge retail network. The group will restructure its BCBG business with its own scale and distribute it to different wholesalers, retailers and online shopping businesses.

The North American market of BCBG Max Azria Group LLC is still the largest business area of the brand. Last year, it contributed 80% of revenue to the group, with a revenue growth of 10.2%. Le Yumin told Bloomberg TV presenters that despite negative news such as bankruptcy, shutting down and layoffs, which enveloped the US retail industry and created a pessimistic gloomy atmosphere, but because of the multi gradient coverage of Li brand's business, the products not only sold to department stores, but also customers in growth areas such as supermarkets, discount sellers, Amazon.com, and other pure electric providers, so they still maintained rapid growth in the region.

Brand combination

Li Biao brand also released the three year plan for fiscal year 2018-2020, which aims to achieve 5 billion yuan in revenue at the end of fiscal 2020, 150 basis points in gross margin and 50% increase in EBITDA growth.

Le Yumin pointed out that in the past three years, the first three year plan of the brand was established after the establishment of the brand. During the period, the compound annual growth rate of income and EBITDA annual growth rate reached 5.8% and 8.7% respectively, and the gross profit margin increased by 500 basis points. Over the past three years, the business model of the group has become clearer. Through multi brand and multi-channel strategy, the brand portfolio has been diversified and more flexible. Chief financial officer Ron Ventricelli has a capital expenditure of 72 million during the supplementary period.

Le Yumin revealed that M&A is not the focus of the next three years, but the group plans to continue to introduce new brands and promote organic growth in other ways. He said that at present there was no plan to carry out acquisitions in China, but he was optimistic about the development of the mainland market, especially the great potential brought by the middle class, so the group would continue to introduce its brand into the mainland.

In the rapid development of e-commerce channels, Le Yumin said the group is building an e-commerce platform. He pointed out that the decline of traditional retail mode over the past few years and the application of wider sales channels have pushed e-commerce up 42.9% in 2014-16 years. He believes that the cost of operating an electric business is higher than that of starting physical stores. Taking Amazon.com Inc. (NASDAQ:AMZN) as an example, it is predicted that after the technology companies seize the market share, they will pass the cost of freight and return to consumers, and the products of online channels will eventually rise. Meanwhile, retailers will continue to accelerate their integration online and offline, and the physical stores will gradually reduce, and will focus on the use of showrooms.

When it comes to the new three year plan, Le Yumin says the goal is more conservative, but he is "neutral" about the confidence of the goal, and he does not provide the plan's investment budget.

HSBC expects that the SG&A expenditure of the brand will remain high in the next three years, and the profit margin will be slow. Therefore, it is expected that the current EBITDA in fiscal year 2018 and fiscal year 2019 will be reduced by 18%-22%.

During the interview with reporters, Le Yumin pointed out that although the operating expenses rose by 15.5% last year, the group's growth pattern and revenue and gross profit margins increased, so the expenditure is in line with group expectations and business development trend, and it also lays the foundation for growth in the next three years. He believes that the size and mode of the group are their advantages, whether lucky or smart. The group has been in prosperity since its establishment in 2014.

At the end of Thursday, the 0787.HK fell narrowed to 20.18%, at HK $0.91, narrowing the cumulative increase in the past 12 months to 33.8%. HSBC lowered its target price from HK $1.5 to HK $1.1, a decrease of 26.7%.

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