2017 XTEP Children'S Clothing Profits 2018 XTEP Carefully Expand Children'S Clothing Business

XTEP cautiously expanded children's business in 2018, and expects that the number of stores will remain unchanged.

In April 9th, the company announced the first quarter of 2018.

The average 2018Q1 store sales performance (at retail value) was lower than that of the same period in 2017 years.

Retail discount 7.5-8 discount, retail inventory about 4 months.

Same store sales reflect the sales performance of a physical store longer than a year.

These shops account for about 70% of the total number of XTEP stores.

Commentary

1, the pformation of retail terminals has basically been completed and the results have been revealed.

The retail channel is flat and pformed from wholesaler to retailer.

In 2017, the company made a flat adjustment to the terminal retail system, and encouraged the exclusive agent to pform from wholesaler to retailer. 60% of the shops were directly owned by the exclusive agent, while the rest were operated by franchisees.

Close shop with poor performance, upgrade store image and enhance store efficiency.

By the end of 2017, there were about 6000 shops and 500 stores in the second half of the year.

In 2017, Q4 average store sales increased single digit, and 2018Q1 low double digit growth.

The company has changed more than half of XTEP shops into the new 6S generation sports image.

The new sports image has increased the passenger flow and increased the joint rate.

The newly decorated shop has more than 10% sales per square metre.

The electricity supplier plate has become a new growth point.

In 2017, sales of e-commerce channels accounted for more than 20%, and the company took the lead in Tmall running shoes sales.

2.

Company sports marketing, entertainment marketing two aspects of strength, functional products to create the first brand of running, sports life products are closely related to street fashion.

2017 advertising and promotion expenses 658 million, an increase of 3.3% over the same period, the main reason

The company continues to increase its running marketing, create "XTEP 321 Running Festival" and "XTEP hot refinery", and set up 3 new XTEP running clubs in Nanjing, Changsha and Hefei.

In terms of sports endorsement, two Chinese track and field Olympic medalists are added as Wang Zhen and Cai Zelin, spokesmen for sports stars.

In terms of entertainment stars, Zhao Liying and Lin are updated as spokesmen.

XTEP child business expansion slowed down, the negative impact on performance weakened.

At the end of 2017, there were about 250 children's shops in XTEP, with little contribution to their income.

Children's wear

Highly dispersed and fiercely competitive, the company expanded child business cautiously in 2018, and the number of stores is expected to remain unchanged.

2016 XTEP children's business restructuring in the second half

The provision for impairment has reached its peak and began to decline significantly in 2017.

In 3 and 2017, the pformation effect was better than expected, and the performance of replenishment stock rebounded in 2018.

In April 3rd, the company released 2017 annual report: the annual income of 5 billion 113 million yuan, down 5.2% compared with the same period last year; net profit to the parent company 408 million, down 22.7% compared with the same period last year, a drop below the guideline we gave (31.5%) issued by the company (25-35%).

The one-time cost of repurchase stock is 120 million 800 thousand yuan. If the inventory repurchase loss is not considered, the net profit to the parent is 529 million yuan, higher than that in 2016 (528 million yuan).

Future focus: (1) the pition pains ended, 2018 channel replenishment inventory, performance is expected to rebound.

(2) the improvement of store efficiency and business efficiency will enhance the control capability of retail terminal. In 2018, the new flagship experience center will be opened at most 10.

(3) the industry is getting warmer. The company has intensified its research and development, and is looking forward to new products with high cost performance.

(4) implement multi brand strategy, expand brand portfolio, target high-end market and other unique sports retail channels.

Based on better performance than expected in 2017 and better performance of 2018Q1 retail sales, we raised 2018/19E's earnings forecast.

Separately increase the 2018/19E revenue 8.2%/8.1%, and raise the net profit of 2018E/2019E to 5.5%/10.2%.

We now predict that 2018/19/20E's revenue will be 5 billion 665 million /61.84 billion /66.72 billion, YoY10.78%/9.17%/7.89%.

2018/19/20E net profit YoY39.47%/15.47%/11.08%, EPS0.26/0.30/0.33RMB.