Analysis Of The Reasons For Baosheng International Profit Decline

At the end of July, a generation of shoe king BELLE officially withdrew from the market.

As everyone knows,

except

Besides, it is also one of the main domestic sales distributors of sports brand Adidas and Nike.

Today, BELLE has only left a shadow for Hongkong's capital market, the same as Adidas.

What is the status quo of Baosheng international?

According to the world clothing and shoe net, Baosheng international has released its first half performance in 2017.

Judging from this performance, Baosheng international performance in the first half of the year can be said to be mixed.

Fortunately, as of June 30th, the group's operating income increased by 14.5% to 9 billion 515 million yuan (if not marked, the same below).

According to the announcement, revenue growth comes mainly from the same store sales growth, new stores offering revenue and new online channels.

Although the revenue of Baosheng international has increased significantly, its performance has not been satisfactory.

Over the same period, the profit attributable to shareholders of the group decreased by 19.6% to 299 million yuan compared with the same period last year.

According to APP, the decrease in profits is mainly due to the increase in sales and distribution expenses and administrative expenses, as well as losses in the sale of subsidiaries.

In the past three years, the first reported profits decline.

Statistics show that Baosheng international is a distributor of international brand footwear and clothing, and its parent company is Baocheng group.

Baocheng group's business is mainly divided into footwear foundry and sports goods sales.

The former is responsible for the Yuyuan group (00551) listed on the Hong Kong stock market, while the latter is responsible for Baosheng international.

Baosheng international, formerly the Yuyuan group's retail business, was independently listed in 2008.

In addition to Adidas and Nike, Baosheng international brand portfolio also includes Kappa, Reebok and so on.

As of June 30th, Baosheng international has 5464 Direct stores and 3036 franchises in China.

2012 and in 2013, due to the depressed domestic sporting goods market, Lining, Anta and other brands were weak, resulting in the loss of OEM and ODM production.

In 2013, Baosheng International's revenue was 10 billion 940 million, and the company's owner accounted for 238 million.

To improve the situation, Baosheng international pferred the footwear manufacturing business to Yuyuan group at the end of 2013.

Since 2014, the group's performance has returned to the track of positive growth.

In the first half of 2017, Baosheng international revenue continued its previous growth trend, but its owner's profit fell for the first time in nearly three years.

As mentioned above, the decrease in profits is mainly due to the increase in sales and distribution expenses and administrative expenses, as well as the loss in the sale of subsidiaries.

Sales and distribution expenses totaled 2 billion 920 million yuan, representing an increase of 17% over the same period last year, accounting for 30.7% of total business revenue.

Baosheng international explains that this part of the cost is mainly the group's continuous investment in shop expansion and optimization, shop renovation and staff training, resulting in a corresponding rise in staff costs, rental expenses and licensing fees.

Apart from distribution and administrative expenses, the decline in gross margin is also one of the reasons that affect Baosheng's net profit in the first half of the year.

During the period, Baosheng International's gross margin was 3 billion 292 million yuan, an increase of 11.2% compared with the same period last year, and its gross margin was 34.6%, a decrease of 1 percentage points compared with the same period in 2016.

Baosheng International said that the main reason for the decline in gross margin was that the inventory clearance rate was relatively slow, which led to an increase in inventory provision.

In the first half of the year, the group's inventory provision was 87 million 26 thousand.

Share prices ride the roller coaster in the first half of the year

Although Baosheng international delivered a mixed report card in the first half of this year, the trend of its share price might have made investors sweat a lot - less than 6 months to 3 diving.

The first time in January 9th was related to a notice.

According to the announcement, during the 2016 annual performance and internal review of the company's accounting records, it was found that there were some incorrect sales records in December 2016, which may lead to sales pactions that did not occur before the end of 2016.

Although the announcement said that the sales amount involved was not significant, many investors voted with their feet.

Baosheng International's stock price plummeted by 22.22% the day after the announcement.

The diving on that day may be more because of market panic and speculation. After all, sales data exaggeration is not a trivial matter.

In the two months after that crash, Baosheng International's stock price has recovered.

But in March and May, the stock dropped two times.

According to the world clothing and shoe net, two subsequent slump occurred in 2016 and 2017 first quarter results respectively.

Over the past six months, the extreme market has also shown that investors are still skeptical of Baosheng international after the exaggerated sales figures and high-level personnel changes.

So far, what is the prospect of Baosheng international? On the prospect of Baosheng international, it is inevitable to take a look at the sales and industry situation of Adidas and Nike.

In the three months ended June 30th, Adidas Group sales grew 19% to 5 billion 38 million euros, while core brand Adidas sales increased by 21%.

Among them, the sales growth of Adidas in China is the most significant, rising 28% to 865 million euros, and the target of 1 billion euros in the quarter.

{page_break}

Nike released its fourth quarter financial report in fiscal year 2017, showing that its Nike brand sales grew 7% to 8 billion 100 million dollars.

The group's emerging markets such as greater China rose 11%, making it the engine to drive the global market.

In terms of industry, the report of Ou Rui International shows that in 2016, the total sales of clothing and footwear increased by 3.8% over the same period last year, reaching US $1 trillion and 700 billion, the smallest increase since 2008.

But sportswear was excellent, and the growth rates of sneakers and costumes in 2016 were 10% and 6% respectively.

By 2020, China's sports apparel market will grow to two yuan per year to 280 billion 800 million yuan, which is faster than the luxury market, and the luxury goods market will grow by only one digit per year, according to ou.

With the concept of national fitness beginning to infiltrate into the main consumption crowd, consumers' consumption habits have been quietly changing. From the past fashionable pursuit of concept consumption, more and more tend to experience consumption with functional specificity.

Nowadays, only in sports shoes, many people are equipped with different functions such as running shoes, basketball shoes, football shoes and so on. It is no longer like buying a leisure and sports "golden oil" style leisure shoes to deal with everything as before.

In the long run, sports apparel enterprises including Baosheng international still have great potential for growth.

Let's take a look at Baosheng International Valuation.

As of August 11th, Baosheng International's stock price closed at HK $1.44.

WIND's information shows that the group's P / E is 13 times.

Compared with other sporting goods shares in Hong Kong stock market, Baosheng International Valuation is relatively low.

But we still need to pay attention to the cost of manpower, rents and so on.

At the beginning of this year, Goldman Sachs reported that the group opened its business in the fourth quarter of 2016, which resulted in a decrease in gross margin and an increase in employee pay.

The above cost is still rising from the gross profit margin and operating interest rate of the group in the first half of this year.

At the same time, the group's management changes in the first half of this year remain unchanged.

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