In Order To Maintain The Brand Image, The Company Would Rather Give Up Or Sell The Stock.

Clothing business, fear of inventory backlog; fashion is even more so. Even the world's top fashion companies may be overwhelmed by inventory problems.

Recently, Sweden's well-known clothing enterprise Haines Maurice (Hennes&Mauritz AB, hereinafter referred to as H&M) released the first half of 2018 financial data.

Data show that the H&M warehouse has backlog of $4 billion worth of merchandise. How exaggerated is this number?

What is H&M's global sales in the first half of 2018? $12 billion 700 million.

The inventory value is US $4 billion.

In June 28th, H&M released its 2018 earnings report (December 2017 May 2018). The most noticeable thing in the earnings report was the high inventory reached 36 billion 300 million Swedish kronor (about 4 billion US dollars, or 26 billion 800 million yuan), an increase of 13% over the same period last year.

Inventory backlog is, of course, too much production and less sales than expected. In the first half of 2018, H&M sales amounted to SEK 113 billion 900 million (about US $12 billion 700 million), almost no growth compared with the same period last year. At present, the backlog of inventory value has reached 31.5% of sales in the first half of the year, and also accounts for 32.3% of the total assets of the company (about 12 billion 500 million US dollars).

According to Bloomberg, H&M said in March that the goal of 2019 was to reduce the inventory / sales ratio to 12% to 14%.

After bad sales and backlog, H&M's net profit in the first half of the year dropped by 33%.

For the inventory problem, H&M said in the earnings report that the high inventory level was mainly due to the poor circulation of commodities in the main market during the company's spanformation. In addition, due to inventory problems, the company expects that in the third quarter of 2018, clothing prices will drop sharply.

According to CNN reports, Citibank analyst Adam Cochrane said that H&M may be multiple in the future. market Start a discount promotion. However, some investors want the company to take a more active approach to clean up inventory.

However, Adam Cochrane believes that H&M hopes to find ways to make the best of both worlds.

Because too much discount will damage the brand image. Management does not want H&M to become a cheap discount brand.

H&M also said that if these clothes could not be sold, they would be donated to charity or recycling.

At present, H&M is the second largest clothing retailer in the world, lagging behind Spain's Inditex (Zara parent company). However, bad performance results in the company's share price being ignored by the market.

According to Bloomberg reports, only 2 of the 34 analysts concerned about H&M bought H&M "buy" rating. 1/4 of H&M's tradable shares are short selling by investors. Since 2018, the company's share price has fallen by 18%. Up to now, the stock price of H&M has fallen by 63.77% from its highest point in March 2015, and its market value has evaporated 38 billion 400 million dollars since then.

At present, H&M has a total market capitalization of 21 billion 700 million US dollars, equivalent to 2 hahallan house (market capitalization of about 8 billion 600 million US dollars). By contrast, the total market capitalization of Zara parent company has reached US $104 billion.

Online layout can not keep up with suppliers "lying gun"

High inventory is only a surface problem for H&M. According to CNN, some analysts believe that the fundamental problem of the company lies in the slow pace of online sales.

With the change of consumption habits and the development of e-commerce platforms such as Amazon, the tradition clothing Retailers are under increasing pressure. In April this year, rating agency Moodie pointed out in the report that retail sales in the first quarter of 2018 industry The default has reached a record high.

H&M reported that the second quarter of 2018, the company's online sales increased by 17% over the same period last year. By contrast, the online sales of H&M's rival Inditex (Zara parent company) increased by 41% in 2017. At the same time, Inditex has broken through the barriers of online and offline operation through new technologies. In a British concept store, Inditex also uses robots to process network orders.

Nevertheless, H&M still did not give up the expansion of physical stores. H&M said that in 2018, the company expected to open 390 new stores and close 150, with a net increase of 240, mainly in emerging markets. Previously, H&M expects to close 170 stores this year.

H&M's bad situation also affected the following suppliers. From the end of May to June, brokerages and investment banks were losing their H&M suppliers (2232, HK).

Nomura Securities: down to the company's gross profit margin forecast this year, from 21.1% to 19.4%, while lowering the target price to 8.8 yuan, the company's rating down to "neutral";

In May 31st, Citibank, Jingyuan international management disclosed that the problem of order allocation is likely to make the company's gross profit margin lower than expected this year. At the same time, facing the strong RMB and raw material prices, Jingyuan International's net profit forecast will be reduced by 9.5% to 188 million US dollars this year. The target price of Jingyuan international reduced 5% to 10.3 yuan to maintain the "buy" rating.

In June 26th, Citigroup lowered its target price from 10.3 yuan to 12.6% yuan to maintain the "buy" rating of investment.

Although Jingyuan International announced in June 24th that its performance in the first half of 2018 remained stable, the board did not know any reason for the decline. However, there has been no 11 consecutive fall from June 12th to 27.