Seven Wolves 320 Million Invest In Karl Lagerfeld To Create "Fashion Industry Group"

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Brand seven wolves, in order to landing 2016 annual report stressed the future development strategy: the "seven wolves" brand as the leader, to create a "fashion industry group".

Recently,

With 320 million yuan to invest in designer brand Karl Lagerfeld (referred to as "KLSH"), China's operation entity will get KLSH's trademark right to use in Greater China.

In the related instructions of the seven wolves on investing in Karl Lagerfeld project, it is clear that the paction is in line with the long-term strategic development direction of the company to create seven wolves fashion group, and create new profit points. The successful operation of this sub brand will open the window for the seven wolves in the field of light luxury clothing.

The investment is divided into two parts: the first part, the seven wolves will get the 80% stake of Karl Lagerfeld Greater China holding Karl Lagerfeld Greater China Holdings Limited, the company has the right to distribute Karl Lagerfeld in the mainland, and the second part is the seven wolves will invest 80 million yuan in China's brand retail business.

The two total investment is 320 million 400 thousand yuan or equivalent dollar.

The background of the seven wolves' pformation of "fashion group"

(1) main business sector growth bottlenecks appear, profitability decline

The seven wolves, founded in 1990, are men's wear in Fujian Province. They are also representative of men's wear brands in China. Their jackets have been ranked first in the market share of similar products for 17 years in a row.

What is rare is that as an old brand of business men's wear, the seven wolves have always maintained a good brand vitality. In recent years, young people and high-end markets have been actively explored, and cross-border exposure has been continuously carried out.

But it is difficult to conceal the fact that revenue decline and net profit decline.

In 2012, it was the peak of revenue of seven wolves, reaching 3 billion 477 million yuan, but in 2013 it was the first time since the listing of seven wolves, and its revenue was 2 billion 391 million yuan in 2014.

From gross margin and net interest rate, gross margins basically remained stable, and net profit was declining. At present, compared with similar clothing brands, they still get the passing results. In recent years, the clothing industry has been having a hard time.

Seven wolves revenue growth fatigue, profitability decline, and product sales are inseparable.

In 2016, there were about 900 million revenue from seven wolves online channels, of which about 400 million were needle spinning products.

That is to say, nearly half of the seven wolf online channels rely on low profit products such as underwear, underwear, socks and so on.

From the point of view of product revenue, (see chart):

(wolves 2016 annual report)

Other categories account for 30% of total revenue.

In the 14 year, the seven wolves began to do the needle spinning products business. I didn't expect two years ago to become the biggest revenue point for enterprises.

It is noteworthy that the revenue and proportion of T-shirts that are easy to fashion design are quite good and the rate of increase is quite good, and the jacket that has been the first comprehensive product of the same kind for seventeen consecutive years now accounts for less than 10%.

(two) offline stores are shrinking and online business is growing.

Compared to the brand aging and the macroeconomic downturn, the impact of foreign brands' entry, electricity suppliers and other new models and new channels on offline retail and ordering mode is the core issue of the decline of the performance of the seven wolves, and also the fuse for the traditional clothing industry shuffling.

More than 80% of the seven wolves' stores are franchised stores, which decide the output by the single volume of the order, and the franchisees take the goods around half a year, and the price is also set up by the franchisees.

The long delay and terminal price confusion of listed companies are the fatal drawbacks of the order placement mode. The seven wolves also realized the problem and began to implement the wholesale to retail strategy, reducing the number of franchisees, improving their retail capabilities and new store formats.

As shown in the picture, the number of terminal stores of the seven wolves has dropped significantly every year since 2012, and is expected to drop to around 2000 in 2016. At the same time, we should speed up the construction of new channels, such as excellent shop, discount shop, concept experience living hall, etc., and make differential display of the stores. We also use magic mirror and machine man Xiao Bao to increase the interactive drainage of the stores, so as to enhance the store's intelligence and user experience.

On the online channel, the performance of the seven wolves also maintained a relatively high growth rate. In 2011, sales of the seven wolves e-commerce reached about 100 million, up to around 900 million in 2016, accounting for 1/3 of 2016's operating income, and the growth rate was very fast.

From the above data, although the industry shuffle unstoppable, but the seven wolves' response is relatively timely, the road has not deviated, and has maintained stable performance compared with similar brands.

According to the latest report released by the seven wolves in the first half of 2017, the company's income in the first half of this year was 1 billion 282 million yuan, up 12.06% from 1 billion 144 million 100 thousand yuan in the same period last year, and the total profit was 158 million 400 thousand yuan, up 14.11% yuan from the same period last year, and the net profit attributable to the owners of the parent company was 122 million yuan, up 15.95% yuan from the same period last year.

(three) the original business combination, the stock pressure increases.

Clothing industry has always been facing problems: inventory.

Clothing as a seasonal and popular product, inventory pressure will have to wait for the next year to digest, or even directly outdated to the end, at a loss, no one is interested. According to the existing business combination form, the seven wolves inventory problem is also getting more and more serious.

From the above picture, from 2011 to 2013, the gap between sales volume and output is not large in the three years, and the inventory is relatively stable. However, the output of 14 and 15 years has increased by a large margin, which has led to a rapid increase in stock. Although the gap between sales and output has narrowed in 16 years, the stock has been reduced.

Inventory is closely related to the number of stores. The inventory of these franchisees is offline. In the seven wolves brand store, it can be said that there is no beginning.

In the face of more and more stocks, seven wolves naturally need to digest. In 13 years, the seven wolves started the construction of new outlets, such as factory stores and discount stores, while online providers began to clear inventory.

At present, online products are also constantly developing on-line, but clearing the library is still the primary task of the seven wolves.

In the field of electricity, seven wolves use the distribution system. We can even see more than a dozen "seven wolves and some stores" on the Internet. These are the seven wolves online distributors. Undoubtedly, they will break through in sales volume, but they will be greatly reduced in terms of profits.

If KLSH can bring the whole brand value of the seven wolves to the gold content of the light luxury direction, the new product intake will change the original brand single business form of the wolf wolf, and it will play a certain role in inventory optimization.

Seven wolves' Fashion Group Transformation Road

In the past two years, the seven wolf company's strategic direction has been pformed from "pure industry" to "industry plus investment", and actively participated in the online and offline fashion consumption formats.

In 2016, seven wolf 2017 spring and summer "Yi wolf series" Milan big show; seven wolf wolf brand totem Global Conference opened in Xiamen, renowned designers, fashion people and media gathered from home and abroad.

In addition to recruiting famous designers and engaging in fashion activities, the seven wolves have made frequent appearances in the fields of science, culture, entertainment and politics, and have actively carried out cross-border cooperation with Huayi Brothers, shell, Tencent, Uber, millet and other enterprises. It can be said that in terms of brand promotion and pformation, the seven wolves have a good road, doing better than most garment enterprises, and have made many efforts to avoid brand aging.

In the field of investment, the seven wolves are not limited to fashion.

There are three major investment related to fashion:

Hangzhou Kenna Clothing Co., Ltd. has obtained the luxury brand Versace, Connally and George Jason's agency business in China; Shanghai Investment Corporation SPC (farfetch project), shares the international fashion business platform Farfetch; modern digital holdings limited, "weekend pictorial" parent company modern communication subsidiary.

Acting luxury business, joining the fashion business platform, and working with fashion magazines, these actions are reliable from the perspective of operation or brand pformation, and the biggest investment of the recent seven wolves has been given to the Qianhai reinsurance Limited by Share Ltd.

The cross-border action is considered by the industry to be the YOUNGOR, a lithium battery giant in the clothing industry.

In addition, tiger sniffing found that in recent years, seven wolves built and acquired fashion brands:

Saint worth, the 2008 international designer series, and the French designer Daniel Faret (Daniel Faret) in collaboration with the product, is the extension of its original product line, business style positioning high-end fashion, emphasizing the tailoring quality.

WOLF TOTEM (Wolf Totem), seven wolves built the core DNA products, set up an independent "seven wolves" IP.

The seven wolves started the project in 2014. Inspired by the Chinese minorities, the famous designer Colin J was designed for the 3 time in Milan fashion week.

OWOOO proud, the seven wolves fashion casual men's brand, founded in 2015, positioning around 30 of urban fashion, ranked 2017 in the win win big Data Center released the 14 half of the men's wear brand list.

16 ME NORD, or 16N, in 2011, the French brand director Louis Houdart was co founded with the Chinese star buyer Ada Mo, positioning the trend punk style, in recent years attributed to the seven wolves.

320 million "KLSH" is actually a hot potato.

KLSH is the Karl Lagerfeld (Carle Lagrange) named by the fashion industry. Its name is light luxury brand. There is no doubt that it is a good brand from every angle of product and brand effect.

The 84 year old legendary designer, who designed the Fendi brand in 1965, has become a Chanel brand designer in 1983. Until now, besides being the title of design director of Chanel and Fendi, he also has many identities as writer, film director, photographer, architect and so on. As the head of the fashion industry, his legendary experience has been heard by every fashionable person.

At present, KLSH still has Lord Buddha to take charge of himself. At the moment, there is no need to worry about the brand design level. With the IP effect of the old Buddha himself, it can also get twice the result with half the effort. The seven wolves have ushered in a big opportunity. Whether we can grasp it well depends on the following two points.

The 1. wolves' operation capacity for the agent brand is worth considering.

In the 11 years, the seven wolves bought Kenna Hangzhou Garments Co., Ltd., according to the relevant literature. When the seven wolves bought Kenna, Kenna was mainly responsible for the Italy luxury brand Versace and Connally and the famous Danish jewellery brand George Jason's agent business in mainland China, and became one of Connally's largest two agents in China. There were 15 outlets in the mainland, 4 Versace companies, and outstanding agency business capabilities, which attracted the attention of the international luxury brands.

This business was also a major event in the industry, but the outcome was quiet. In April 1, 2016, the seven wolves traded Kenna to Zhejiang Yi Tang Industrial Co., Ltd. at a price of 11 million 136 thousand and 800 yuan, because of the loss.

In the 11 year, the seven wolves bought Kenna, the net profit was 6 million 660 thousand, and the next year's profit decreased. After most years, it lost money, and it had lost 14 million 780 thousand before 16 years' trading.

It is undeniable that there are reasons for the luxury consumption environment and cross-border electricity providers, but the seven wolves' acting capacity is also doubtful.

(data source "seven wolves' announcement on investing in KarlLagerfeld project")

At present, the above picture is the financial data of KLSH in the past three years, and the loss is clear, so its operating company is not as good as Kenna.

It's not easy for the seven wolves to pick it up.

Obviously, the seven wolves were picked up by a hot potato.

2. domestic environmental constraints

KLSH is losing money in the mainland, which is related to the operation company and the mainland environment.

It is a fact that the overall aesthetic level in China is lagging behind.

At present, the market is generally optimistic about the domestic light luxury market, but at present, most of the domestic luxury brands are better off the luxury line and the long known light luxury brands, such as Coach, KateSpade and so on. The newly emerging designer brand is mostly unnoticed except for the street culture and music subculture, which is the same as the cold store buying in China.

We do not pay for the design. We pay for fame, LOGO and star net red.

In addition, it is worth noting that 3KLGC's shareholding structure is rather complicated.

The company holding KLGC 100% stake is KLH, while the Cao Qifeng family of Hongkong, known as "Hongkong textile tycoon", indirectly owns KLH71.03%'s stake through SPV and KLIF Limited, and is KLH's actual controller.

Summary

KLSH's brand name covers leather goods, clothing, watches and perfume. Currently, it has 80 single brand outlets in Europe, North America, Middle East and Asia, as well as wholesale business in Europe, Middle East and Asia, and has KARL.COM in 96 countries.

In 2016, the brand and G-III set up a joint venture to reintroduce the Karl Lagerfeld Paris in the North American market.

The brand says that Karl Lagerfeld is expanding overseas, with the US market showing strong performance.

In the Greater China region, KLSH business started relatively late and entered China for only 3 years. Currently, the brand has operated 6 direct retail stores and 1 Oteri J stores in Beijing, Shanghai and some of the first tier cities.

In terms of authorized business, the Macao Karl Lagerfeld homonymous Hotel, which was personally designed by Karl Lagerfeld, will open in 2018.

KLSH is a good brand with potential. This business is also a good business for the seven wolves strategy, but it is very difficult to test it to reverse the decline. But in the long run, KLSH is worth cultivating. Seven wolves need time to become a fashion group.

More about the wonderful reports of seven wolves, please pay attention.

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