Why Should XTEP Spend The Wrong Money?

According to the world clothing shoes and hats net, some investors are very fond of the stock market. They do not buy anything or do not sell anything every day. They always feel that something has not been done.

However, the consequences of doing so often result from picking up sesame seeds and losing watermelons.

Indeed, it is really not easy to do anything in the stock market, because even if you don't toss, who can guarantee that you invest in a company that does not bother? No, XTEP International (01368) has recently made a lot of trouble.

Net profit behind the stock price, net profit behind buy back

In December 8th,

According to the international announcement, the company expects to use no more than 150 million yuan, and centrally deal with all the products produced in the whole channel before 2015.

The repurchase is expected to lead to a year-on-year net profit decline of 25% to 35% for XTEP as of December 31, 2017.

Why do we need to spend money like this? Investors are very angry and the consequences are very serious.

At the beginning of December 11th, XTEP's stock price dropped sharply, and its intraday price fell more than 11%.

Admittedly, in the face of such unexpected events, it is very difficult for investors to make rational judgments in a short time. Even Credit Suisse is also crying out in XTEP's Research Report.

Repurchase stock is significant.

So why does XTEP spend so much money to buy back the old products? In my view, XTEP has done a lot of money, but it is not blind and has multiple benefits for the company in the long run.

First, this is the last step in the 3+ strategy, with milestone significance.

It is understood that, as early as the XTEP Q1 2016 commodity ordering meeting, XTEP launched the 3+ strategy, known as the "future change strategy", namely product +, sports +,

。

The 3+ strategy aims to push the company's products, sales and after-sales services to a new and higher level.

In the announcement, XTEP pointed out that the repurchase and processing of products produced before 2015 can better unify the brand image and make the whole channel more healthy and more active in selling new products.

This is a one-off action, representing the last step of XTEP's rectification in 3 years.

Second, boost the confidence of agents and franchisees.

The flat sales channel of XTEP - the proportion of direct distributor of total agents increased from less than 20% of the total number of stores before 2015 to more than 60%, which means that XTEP's products and brands have been recognized by more and more agents in recent years.

But with the increasing number of agents and franchisees, how to deal with the products that can not be sold become a "headache" problem.

XTEP's timely repurchase plan will undoubtedly enhance the confidence of acting XTEP products.

As a matter of fact, the average profit per square meter operated by XTEP's general agent is more than 10% higher than that of the store.

After buying the old products, the products sold in the past are all new products produced in recent years. The overall profit margin of Future Ltd products is expected to further improve, so as to further enhance the profitability of the stores and form a virtuous circle.

Third, improve inventory turnover efficiency.

From a financial point of view, XTEP's recycling of old products can further optimize the company's inventory turnover efficiency.

Reporters noted that, according to XTEP's interim financial report over the years, the company's semi annual inventory turnover date was 185.9 days in 2014. After proposing the 3+ strategy, the inventory turnover rate of the company had improved significantly, and the turnover days in 2015 and 2016 were 140.9 days and 107.98 days respectively.

But perhaps by the old inventory, the company's stock turnover in mid 2017 has risen to 131.14 days.

It is worth mentioning that although XTEP turnover rate has declined, it still outperforms Anta (02020)'s 136.22 days, Lining (02331)'s 169.16 days and 360 degree (01361) 136.57 days.

(above inventory turnover data from the Oriental Fortune net)

Recycling products are used as charities to enhance the company's image.

The reporter understands that part of XTEP's repurchase stock will be donated to charity, part of which will be arranged by third party buyers. The inventory of all buybacks is expected to be sold before the middle of next year.

It can be seen from this point that although XTEP has spent 150 million yuan to repurchase products, the actual amount of loss may not be so large, and the products will eventually be worn by others, which can play a certain advertising effect.

It can be said that XTEP's repurchase stock is actually considered in the long term and has taken care of the interests of all parties.

There is grain in the accounts, but not in my heart.

However, XTEP has spent money after all, and 150 million is not a small sum for a company with a market value of more than HK $6 billion.

This can not help but recall that Lining spent more than 1 billion yuan to clean up inventory at the end of 2012, resulting in the first loss of the company since its listing and also made the company's performance slow down after 4 years.

Source: Lining 2012 announcement

Then, where did XTEP come from and get the 150 million yuan? It seems to reporters that XTEP's bottom line is not only the above reasons, but also its healthy financial report.

{page_break}

First, let's look at the cash on the XTEP account.

In the mid 2015, cash and cash equivalents on XTEP account were 3 billion 210 million yuan.

By the middle of 2017, XTEP's cash and cash equivalents were 3 billion 421 million yuan, even 150 million yuan, still higher than the 2015 figures.

In addition, the XTEP flow rate is 3.3 and the speed ratio is 3.09, which also shows that the company's financial risk is low.

In contrast, Lining, 2012 annual report shows that Lining's cash and cash equivalents are only 1 billion 249 million yuan, when Lining also spent more than 1 billion yuan to buy back stocks, which is "unbearable burden".

Besides being wealthy, XTEP may still be confident of its future performance.

According to the statistics made by Yue Wan circle in China's longest history of Beijing marathon in September this year, the number of athletes wearing XTEP running shoes in 5 hours is the fourth among all brands.

First.

Of the athletes who completed the marathon in 3 hours, the proportion of XTEP running shoes was 10.46%.

Reporters learned that the curtain fell on the 10 day of December 2017, the 2017 XTEP Jinjiang International Marathon race, in a month's registration time, the number of successful entries has reached 10503, covering more than 10 countries such as the United States, Germany, Singapore, Philippines, Kenya, Ethiopia, and nearly 30 provinces, autonomous regions, municipalities directly under the central government and Hong Kong, Macao and Taiwan regions, showing the great attraction and influence of XTEP.

In addition, the single day sales of XTEP double eleven Tmall flagship store in 2017 increased by more than 80% over the same period last year, increasing at the forefront of many sports brands.

At the same time, XTEP's total sales of 207 million yuan with double eleven total network also accounted for 9% of the total revenue in the first half of this year, so it seems that XTEP's annual growth should be guaranteed.

With the bottom and expectation, XTEP flower 150 million takes care of the interests of dealers, optimizes the product structure, maintains the brand image, and does charity work. Is this really bad?

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