Yuyuan Is In A Vicious Circle Of Increasing Profits But Not Increasing Profits.

Yuyuan group's performance in the first quarter of this year is a bit weak. Its pressure is still on, and the pace of future development will not be too easy.

Yesterday, the Hong Kong stock board listed companies, the largest sports leisure in the world.

00551-HK announced its first quarter results in the first quarter of March. The famous brand of Nike, Adidas and New Balance, a leading brand of the world famous sports brand, has shown signs of weakness in the first quarter of this year, and has entered a vicious circle of increasing profits.

The first quarter results showed that Yuyuan achieved an operating income of $2 billion 287 million in the first three months of this year, an increase of 8.9% over the same period of last year, a gross profit margin of 25.24%, a slight increase of 0.2 percentage points over the same period last year, and a year-on-year decline in net profit. The company's owners should account for 95 million 441 thousand dollars in profits during the period, representing a drop of 23.3% over the same period last year, representing a loss of color:

(Yuen 2018 performance report for the first quarter)

Manufacturing sales decline, profitability decline

According to Yuyuan performance report, the reasons for the sharp decline in net profit in the first quarter of this year mainly include the decline in sales of its manufacturing business, the anti leverage effect of operations, the decrease in non recurring earnings during the period, and the rising cost of financing.

Specifically, the total operating income of Yu Yuan quarter from shoe making business (including sports shoes, casual outdoor shoes and sports sandals) decreased by 6.3% to 1 billion 206 million US dollars compared with the same period last year. Meanwhile, the number of shoes in current production decreased by 5.1% to 76 million 600 thousand pairs compared with the same period last year, and the average selling price of each pair of shoes decreased by 1.3% to 15.75 US dollars compared with the same period last year.

In the first quarter of this year, Yu Yuen's manufacturing business (including footwear and soles, accessories and others) and

The total revenue of wholesale business was basically flat (slightly increased by 0.3%, almost 1 billion 429 million dollars).

On the other hand, in the first quarter of this year, Yu Yuan has confirmed that the non recurring profits totaled 4 million 700 thousand US dollars, including 200 thousand dollars in proceeds due to changes in the fair value of derivative financial instruments and 4 million 300 thousand US dollars in the sale of a joint venture company. Compared with the same period last year, Yu Yuan's income derived from changes in the fair value of derivative financial instruments amounted to US $9 million 400 thousand, with a sharp fall.

In addition, in the first quarter of this year, Yuyuan's sales and distribution expenses were also continuously explored and invested in various measures for retail business to adapt to the consumer market. It recorded a record increase of about $288 million, an increase of about 35% compared with the same period last year. This is also the reason why the net profit in the Yuen Yuan period dropped by 23.3%.

Excluding all the above non recurring items, the company owners should account for a recurrent profit of $90 million 800 thousand during the Yuyuan period, down 13.8% from the same period last year.

Increasing profits will not increase profits, performance is now "dangerous signal".

In fact, the performance of Yuyuan in early years is still on the rise, and its turnover has maintained overall growth even now. Especially in 2015 and 2016, the gross profit margin and net profit of the group also climbed to a small peak in recent years.

As shown in the above table, unfortunately, in 2017, the group's overall performance trend was callback. Last year's net profit fell into a turning point for Yu Yuan stepping into the current situation of "increasing profits without increasing profits".

In the first quarter of this year, net profits continued to slide and "repeat the same mistakes". It also reflected that Yuyuan's performance growth path had not been very wonderful.

Retail subsidiary Baosheng failed to privatize, Yu Yuan continued to "carry on the road ahead"?

When it comes to the current operation of Yuyuan, we have to mention the 03813-HK, a retail Affiliated Companies, who was privatized by the final controlling shareholder at the beginning of this year.

In January 21st this year, Yuyuan announced that Affiliated Companies Baosheng, an indirectly holding 62.41% stake, was privatized by the two ultimate shareholder of the two Holdings (indirectly holding Yuyuan 49.99% stake).

As a subsidiary of Yu Yuan retailing, Baosheng is a famous sportswear retailer and agent in China. Its main business is sportswear retail and distribution agency brand. It is the largest distributor of Nike and Adidas in China.

At that time, the privatization plan announced that after the successful privatization of Baosheng, the relationship between Yu Yuan and Baosheng will turn from "mother and son" to "brother". Yu Yuan will focus on the manufacturing of OEM, while Baosheng's rights and interests will be returned to Baocheng and will focus on retail business.

While reviewing the performance of Baosheng in the past year, although its operating income has maintained relatively stable growth, the net profit of Baosheng recorded a significant decline in the quarter of 2017. Under the pressure of rising staff costs and rental expenses, Baosheng's profit outlook is not optimistic:

In April 10th this year, Baosheng declared that the privatization case was negatived at the special meeting of shareholders. This means that Baocheng, Yu Yuan and Baosheng parties failed to privatize Baosheng for nearly 3 months. Baosheng will not be delisted.

When the news came out, Yu Yuen and Baosheng share prices both plummeted. Yu Yuan shares fell 10.54% in April 10th, and Baosheng share price fell 31% in a day.

Experiencing a capital

After the carnival feast, Yu Yuan also declared that "burden reduction" failed with the success of Baosheng privatization.

For the current Yuyuan, the biggest "discomfort" may be to continue to carry forward the road ahead in the future. After all, according to its own performance, Yuyuan's pressure is still in the future, and the pace of future development will not be too easy.