Analysis Of 4 Brands Coping With Inventory Crisis

According to the world clothing shoes and hats net, in the first half of 2017,

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XTEP and

The four Hongkong listed domestic sports brands reported fewer than 646 stores at the end of last year - which is hardly a good sign, but it will not be a sign of market cooling.

The relative truth is that the four brands are facing a brutal market challenge under the new situation in a more sophisticated way of operation.

The response measures adopted by the two families are very consistent: on the one hand, the proportion of revenue from the high profit channels such as Canada's big brands, electricity suppliers, children's clothing and direct stores is on the other hand; on the other hand, in the sales of the main brand retail outlets that are difficult to improve significantly, we can do everything we can to improve store efficiency and enhance profitability.

Although the market has not entered the winter, Anta, Lining, XTEP and 361 degrees have taken many measures to deal with the stock crisis.

Gross margin -- the bottom line

From the earnings report, the brands are happy and worried about different main indicators. Only one important data is guaranteed growth per household, gross profit margin.

In the first half of this year, the gross profit margin of the four brands rose year-on-year in the range of 0.6 percentage points (XTEP) to 2.7 percentage points (Anta).

Zheng Jie, President of Anta group, believes that Anta's gross profit growth is "surprise". It mainly relies on the higher price of FILA (FIE) business growth, direct retail development, and the control and promotion of Anta's main brand raw materials and supply chain management benefits.

Following Anta, the gross profit margin of Lining group increased by 1 percentage points to 47.7%, leading 361 and 42.3% of XTEP, second only to Anta's 50.6%.

But Lining did not push the high interest rate brand such as FILA, and its main brand sales accounted for 99.2%. From this perspective, the gross profit margin of Lining has reached a very high level.

However, despite the gratifying sales and gross margins, Lining's net interest rate is still significantly lower than the industry average.

In the first half of this year, Lining's net interest rate of 4.73% increased by 0.5 percentage points over the same period last year. It still ranks last in the four place, and has a big gap with other families.

The leader Anta's net interest rate reached 19.8%, an increase of 1.4 percentage points over the same period, and the net interest rates of 361 degrees and XTEP were 11.36% and 13.41% respectively.

Domestic third - 361 degrees against XTEP's back

Besides the gross profit margin, the performance of each brand is quite different from other main data, among which the most prominent one is XTEP, which suffered a year-on-year decline in revenue.

In the first 6 months of 2017, XTEP's revenue dropped from 2 billion 311 million yuan in the same period last year to 2 billion 311 million yuan, a 8.8% decline.

As a matter of fact, this is not the first time that XTEP's revenue has declined. Compared with the same period in 2015, XTEP's revenue fell by 125 million, or 4.19%, in the second half of 2016, according to the annual report data published earlier.

That is to say, in the 12 consecutive months (from July 2016 to June 2017, total revenue of 5 billion 521 million yuan), XTEP's revenue fell by 349 million yuan over the previous 12 months, or 6.32%.

However, taking into account the rapid development of the electricity supplier, gross profit margins and net interest rates are at a relatively healthy level, and XTEP children, who are in the restructuring stage, have not made much contribution to the company's overall revenue in this financial cycle. Although the sales data of XTEP have declined, the actual situation is not so bad.

Compared with XTEP, revenue reached 2 billion 798 million, and XTEP surpassed XTEP as the third place of domestic brand.

According to several major data indicators, the report card of 361 degrees in the first half of 2017 was brilliant, with revenue rising 9.5% to 2 billion 798 million yuan, net profit increased 16.5% to 318 million yuan, and gross profit margin increased from 41.4% in the same period last year to 42.3%.

However, XTEP's actual situation is not as bad as its revenue data, so it can not be too optimistic about the prospect of 361 degree.

Despite a 0.9 percentage point increase in the first half of this year, the gross profit margin of 42.3% at 361 degrees is still the lowest among the four largest domestic brands. In addition, its retail outlets adopt the mode of all distributors' agents, and the degree of electricity supplier development is low.

If the market turns cold in the future, the dependence on dealers and the difficulty of raising gross margins will probably become the 361 degree Achilles heel in the battle of bayonets.

Traditional retail channel -- focus on store effect

By the end of 6 in 2017, the four major domestic sports brands listed in Hongkong (including Anta's Fay and Fei Le children and Desanto brand) had 28619 stores, representing a decrease of about 1.38% compared with 29019 in the same period last year, while the total revenue was 16 billion 325 million yuan, an increase of 10.76% over the same period last year. This overall growth rate was lower than that of 13.63% in 2016.

In fact, in addition to continuing to target Anta like the ten thousand stores, the number of other three major brands is decreasing. While closing the bad stores, efforts are being made to increase the sales of single stores to cope with the declining market situation.

Anta is the only one that keeps expanding in the number of stores.

As of the end of June, Anta's main brands had 9041 stores in the country, a net increase of 181 from 8860 at the end of last year, and FILA and FILA children grew from 802 to 869, while the Dizon store grew from 6 to 21.

In the first half of 2016, the number of stores in 2016 also decreased.

As of June 30, 2017, the number of regular shops, factory shops and discount shops of Lining brand (including LNG, spring label and LI-NING YOUNG) was 6329, of which 1544 were direct stores, 4785 were licensed dealers, and the total number was 111 less than that at the end of 2016.

The change of direct store -4.2% is larger than that of franchisee -0.9%.

In the past 2012-2016 years, the number of XTEP stores has been declining every year, and this trend continues in the first half of 2017.

As of the end of June, the number of XTEP's 6500 stores decreased by 300 compared with December last year, compared with 7510 in 2012, a net decrease of more than 1000.

The store closes at 361 degrees faster, with a net loss of 498 stores in the first half of this year and 5859 stores, which were less than 6000 last year, or in 2008.

In the three brands that have fallen in the number of stores, Lining and 361 degree have completed a substantial increase in revenue, especially 361 degrees. Their electricity sales account for only 4.1%. In the case of 498 stores, the total revenue growth of 9.5% can still be achieved. The effect of improving store efficiency is quite obvious.

In the first half of this year, improving the efficiency of stores is the common focus of the four brands.

Even XTEP, which has double sales and sales, has affirmed its improvements in retail channels in its annual report, emphasizing that the group is closing down poor stores and opening flagship stores with higher store efficiency. "By increasing the sales volume of each customer, reducing human errors, reducing staff costs and streamlining the promotion time and scale, the management process improves the efficiency of single stores".

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High profit growth point: electricity supplier, children's wear, multi brand and direct camp.

While striving to consolidate traditional retail businesses, the major brands are also striving to develop high margin projects according to their actual conditions. They mainly focus on children's clothing, e-commerce and multi brands. Among them, Anta is the only one who can do well in all aspects. They also have strong direct operation system to ensure the source of profits and further open up the gap between other brands.

Electricity supplier - overall rush

The four brands in the first half of this year have renewed their respective business performance. Among them, XTEP mentioned the most content of the electricity supplier in the earnings report, which is related to its confidence in this field: as of the end of June, the electricity supplier accounted for 20% of XTEP's sales, leading to 18.2% of the Lining brand and the double digit of Anta.

Compared with XTEP's electricity supplier last year, "more than 10 percent" accounted for progress.

In contrast, the electricity supplier is the soft spot of the 361 degree.

In 2016, the 361 degree electricity supplier developed four months, with a profit of 71 million 100 thousand yuan, accounting for 2016 of the total turnover of 1.4%.

As of June 30, 2017, the revenue contribution of the 361 degree e-commerce business was 115 million 200 thousand yuan, accounting for 4.1% of revenue. The average monthly electricity supplier income was 19 million 200 thousand, an increase of 8.47% over the 4 months of last year, but not yet winning the growth rate of 9.5% of the brand.

In the annual report of 361 degrees, in addition to the sale of dedicated products online, the retailer is also one of the key points to eliminate retail sales and old stock.

This has led to 361 degrees of electricity providers, no matter in terms of volume or premium, it is difficult to make greater contribution to the gross profit margin of the entire brand.

The top two brands in the two place also have their own achievements in the electricity business.

The overall development speed of Anta's e-commerce business is over 60%. The proportion of Lining's electricity supplier increased from 18.2% in the same period last year to 18.2%, reaching 720 million yuan, an increase of 58% over the same period last year.

For the future development of the electricity supplier business, each has its own priorities.

Lining: emphasis is placed on increasing investment in precision digital operation, improving the sales forecast, landing to commodity planning, group goods, promoting the coordination and integration of supply chain, and carrying out deep content operation around the core flagship stores of each platform, increasing the self media attribute of online shops.

Anta: in order to meet the explosive growth of the electricity supplier, we will integrate all channels from the online channel, offline channel, logistics distribution and big data resources.

XTEP: continue to push forward the O2O mode. E-commerce will enhance its service capability under the assistance of big data analysis, cloud and other advanced Internet technologies.

Through quick replenishment and distribution, the flexibility of e-commerce will be used to increase sales of popular products under the line.

361 degrees: Electronic Commerce and 361 degree core brand, 361 degree children's wear, 361 degree international and ONE WAY together into the five major business brands.

In the first half of this year's earnings or earnings conference, XTEP and Anta both referred to the development of e-commerce business to drive profit margins.

Children's clothing -- new brand and new market

This year, Lining's new sub brand, "Lining YOUNG", began to race horses, aiming at 3-14 year old children, offering 3-6 year old curious children and 7-14 year old dynamic youth two product lines.

At present, it has opened about 20 sales outlets in 14 provinces across the country.

Children's clothing has always been regarded as a brand new growth point. Lining will increase organizational and human resources investment in children's clothing in the second half of the year.

However, apart from 361 degrees, other brands have not released the core data of children's clothing business.

Children's clothing is the best profit growth point at 361 degrees, but it also faces the problem of continued growth.

In 2010, children's wear officially became an independent business sector of 361 degrees, grabbing the opportunity for market development, and gaining a 534% growth rate the following year.

After 7 years of development, this potential business has not significantly increased its revenue contribution to the group. On the other hand, it has failed to make a greater contribution to the 361 degree overall breakthroughs in the gross margin.

In the first half of the year, the 361 - cent children's clothing revenue increased by 12.8%, reaching 308 million yuan.

Like the main brand, the sales of children's clothing at 361 degrees is also streamlined, from 2350 in 2015 to 2000 in 2016, and to 1791 at the end of June this year (735 of which are located in 361 core stores).

But at the same time as the number of sales outlets has dropped, we can also see that the average single store efficiency has been greatly improved.

Another more notable detail is the increase in sales of children's clothing at 361 degrees over the same period last year, while the average wholesale price has dropped by 6%, which has led to a 0.7 percentage point decrease in the overall gross profit margin of children's clothing, compared with the number of sales points in the "reduction of staff and efficiency".

Just like the electricity supplier at 361 degrees, children's clothing business is XTEP's current weakness.

Trapped in the reorganization of XTEP's children's department in 2016, it made little contribution to the group. In the first half of this year, it still focused on the digestion of old products.

XTEP plans to seek more accurate market positioning and launch new products in the second half of 2017.

For XTEP, if you can't catch up with the children's clothing business line, there will be a risk of falling behind.

In the mid-term earnings report, Anta has for the first time adjusted the positioning of its main brand children's clothing from 3-14 to 0-14, which can be regarded as a signal that Anta's main brand will enter the market of infant and child wear.

FILA children are targeted at the high-end children's market at the age of 7-12.

From a regional perspective, 361 of children's 67.8% stores are located in cities with three lines and below three lines. Anta children, like Anta's main brands, focus on two or three line cities.

In the second half of the year, it is particularly important to focus on the children's business of XTEP and Lining. After major changes, how to face the market and whether they are accepted by the market?

Multi brand + direct camp -- the throne of Anta

Whether in the earnings report or at the press conference, "multi brand" is still one of Anta's most frequently mentioned words.

In the first half of 2017, FILA's revenue accounted for nearly 30% of Anta's total revenue. That is to say, FILA's revenue in the first half of 2017 was 2 billion, and its volume continued to approach XTEP (2 billion 311 million) and 31st degree (2 billion 798 million).

During the reporting period, FILA's water consumption increased by more than 50%.

Previously, FILA sales in 2016 were around 3 billion 700 million.

It can be said that the growth momentum of FILA is still undiminished.

If the growth rate of 50% can be maintained throughout 2017, FILA will reach 5 billion yuan this year.

In the first half of the year, Lining's main brand accounted for 99.2% of the sales revenue. Its brands including lotto, Kasen (Kason) and Aigle were not able to resist the banner of many brands.

The high-end outdoor brand One Way of 361 degrees has only 51 stores remaining by the end of 6 this year, and its annual report has not introduced specific revenue data.

Judging from the current market competition, Anta is still thriving in many brand areas.

Now Anta's challenge is to create second successful sub brands to prove that its multi brand strategy is a real success model, not FILA's accidental success.

Strictly speaking, this year is only the first year that Anta will truly test the "multi brand mode". Desanto, who opened the first store in August last year, has 21 stores by the end of June, an increase of 15 over the end of last year.

With the high-end outdoor brand in Japan, Anta has perfected its own multi brand matrix.

Anta has not announced another brand Spandi's information. Another brand Kolon is still waiting for relevant approval.

In the second half of the year, the layout and performance of Desanto, who plans to add at least 29 stores, is worth noting.

In the next few years, besides FILA, the development of Desanto, Spandi and Kolon will have a significant impact on the future direction of Anta.

On the opponent side, Lining holds the exclusive right to operate the US professional dance brand Danskin in mainland China and Macao, and will enter the market in the fourth quarter of 2017.

According to the semi annual report, Lining plans to open 3-5 stores in the fourth quarter of 2017, with the main goal being landmark shopping malls with influential cities.

In the 2016 annual report, Lining had 5-10 stores planned for Danskin2017.

Another key word that constantly pushes Anta's gross profit margin and profits together with "multi brands" is "direct battalion".

In the early days of the development of the domestic sports brand, most of the franchisees and agents were engaged in the horse race enclosure. Then, in the case of relatively stable market, the higher requirements for the brand were put forward. The upgrading of the supply chain, commodity control and brand image, and after continuous development to a certain stage, it was necessary to maximize profits and pay more attention to the retail changes.

Direct battalion is a major means of maximizing profits. Compared with the larger discount supply to wholesalers, the direct retail outlets directly facing consumers have higher gross margins.

Anta is the beneficiary of this area. FILA, which has basically entered the market in the form of direct battalion, continues to maintain a growth rate of 50%. Anta's gross profit margin has been steadily improving in recent financial cycles, and Desanto's business operation is basically a direct operation.

Apart from Anta, another brand with a scale of direct battalion is Lining.

In the first half of 2017, there were 1544 stores and 4785 franchisees in Lining's 6329 stores, representing a net reduction of 67 and 44 respectively at the end of last year.

Cash -- brand security and future chips

If revenue and net profit are the embodiment of strength at present, cash flow is a bargaining chip for future betting.

As of June 30th, Anta's net cash had exceeded 10 billion yuan, reaching 10 billion 30 million, compared with 5 billion 379 million last year.

In the first half of this year, Anta's free cash inflow exceeded 1 billion 800 million, mainly due to the net operating cash inflow almost doubled to 2 billion 58 million.

The debt ratio dropped by 7.7 percentage points to 3.4%.

The turnover days of inventory, accounts receivable and accounts payable are the only "bad news" in the data released by Anta, which changed from 64 days to 68 days, 37 days to 39 days, and 45 days to 49 days. However, such data is still quite healthy, which is comparable to that of fast fashion products.

Lining's inventory turnover days dropped from 94 days in 2016 to 85 days, but there was still a gap of nearly 20 days with the other three.

In terms of accounts receivable and accounts payable, Lining was second only to Anta, which was 56 days and 85 days, respectively, which improved compared with 2016.

In contrast, XTEP's data changed significantly, and the number of days of inventory turnover increased from 51 days in 2016 to 67 days. Accounts receivable days increased from 119 days in 2016 to 164 days; accounts payable days also increased from 107 days to 128 days.

The situation at 361 degrees was slightly improved, the inventory turnover days remained unchanged for 69 days, accounts receivable decreased from 163 days to 152 days, and accounts payable days decreased 1 days to 155 days, but they remained at a very high level.

As of the first half, XTEP's gearing ratio was 19.1%, XTEP's net cash and cash equivalent items amounted to 2 billion 566 million yuan, equivalent to 48.6% of net assets.

But XTEP has only 92 million 400 thousand cash from its business activities, the smallest of four, and has a huge gap with Anta 2 billion 58 million.

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Lining's cash and cash equivalents in the first half of the year were 2 billion 365 million, an increase of 21% over the end of last year, and net cash generated by operating activities was 589 million, an increase of 244 million over 2016, helping Lining improve the cash flow situation.

In the first half of the year, the debt ratio of 361 degrees decreased slightly, from 26.7% to 24.5%, plus 488 million of net cash in the period, 100 million higher than the end of last year, 3 billion 352 million of banks and cash on hand, and an increase of more than 500 million over the end of last year.

Holding huge sums of money, Anta may continue to have big moves in the market in the future. For the acquisition, Ding Shizhong, chairman of Anta's board of directors, said at the press conference, "more international brands are the main ones, and domestic brands are complementary to us.

M & a must conform to our brand strategy and scale can be explored. If we have the current capital and strength, we will surprise you if we have the opportunity.

Six months of rapid market change

After 2015 and 2016 years of market warming and rapid growth, the domestic sports footwear market began to become cold in 2017.

For Anta, Lining, XTEP and 361 degrees, who successfully survived the last stock crisis, it is the most basic quality of brand managers to prepare for rainy weather before the market winds change.

In the first few months of 2017, in addition to the Anta's high-profile 10th anniversary celebration of listing, other brands rarely have voice and movement in a wide range. Even Lining's CBA strategic partnership is so big that it has just released a simple press release by Xinhua news agency.

Behind the calm is that brands are concentrating their attention on the most basic businesses.

Anta, the leader, is at the most powerful moment in history, with good revenue from the first tier cities to the four line cities, and more than 10 billion of its cash reserves allow capital to consider a long-term brand layout.

On the road to strong multi brands, as long as Desanto, Spandi, Kolon and even other brands that may be acquired in the future can replicate the success of FILA, Anta will have the capital to challenge Adidas's current status in the Chinese market and further to the real international brand management group.

The recovery of Lining has a good momentum, but it is not without flaws, which is much lower than the net profit of the industry average, and the cash holdings which are not dominant relative to XTEP and 361 degrees are not matched with the current revenue scale.

In terms of specific businesses, although Lining, children's clothing and electricity suppliers have quite good performance, but the revenue is too concentrated in the main brand and the Chinese market is always not a good thing, want to have greater development of the brand, once again competing with Anta, need more growth points.

By contrast, XTEP and 361 degree players, who have made sharp bayonets in third of the country's positions, have their own worries.

XTEP is experiencing a decline in revenue, and children's wear is always a weakness. But if we solve this problem, if children's clothing can reach the current level of 361 degrees, we can go back to healthy development.

Besides, XTEP also has a hidden crisis that relies too much on running categories. Once the domestic running market becomes colder in the future, XTEP will be the biggest among all brands.

Compared with XTEP, although the development speed of the 361 degree electricity supplier is slow, it is still in the fast growth, and the data on both sales and profits are very good.

At present, there is no serious crisis in 361 respects, but there are many aspects to be vigilant.

First of all, its debt ratio is still 24.5%. In the first half of this year, the interest paid by light has exceeded 102 million. Secondly, international business has made slow progress. Although the first half of this year has recorded a year-on-year growth of over 40%, it is obviously slower than that of last year's growth rate of over 80%.

As of the end of June, 361 degree international currently has 2122 sales outlets in Brazil, the United States, Europe and Taiwan, China. According to the annual revenue of 65 million 200 thousand yuan, it means that the annual revenue of individual outlets in overseas markets is only 30 thousand yuan.

In 2017, the competition of domestic sports brands has entered a new cycle. Anta has begun to work towards higher goals. Lining needs to further solve her problems in the recovery. While XTEP and 361 degree are making up for their shortcomings, we should pay more attention to the fact that the more ruthless market in the future may not allow them any more room for making mistakes.

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