Garment Retail Market "Five Consecutive Ups", Industry Profitability Continues To Improve

With the continuous improvement of residents' income and consumption ability, China's Garment Retailing industry has experienced rapid development for decades. The scale of clothing retailing has increased rapidly from 58 billion 800 million yuan in 2000 to 702 billion 200 million yuan, and its compound growth rate has reached over 23%.

After ten years of rapid development, China's traditional retailing industry is facing more and more problems such as the strong competition of overseas competitors, the market occupation, the poor management of terminal stores, and the unsatisfactory consumption trend.

In the past 2011-2016 years, China's clothing output has achieved a "five consecutive rise", from 25 billion 420 million to 31 billion 452 million, with an average annual compound growth rate of 4.4%. This also shows that in the era of traditional retailing, it is very possible for the garment industry to achieve rapid growth.

Entering the 2017, the electricity supplier mode broke out, and the "new retail" was put forward and included in the national policy. Industrial pformation was inevitable. However, the garment industry did not realize the great pformation of the industrial mode in 2017. The output reached 28 billion 781 million pieces, the first decline in 6 years, and the drop was as high as 8.5%.

2011-2017 years trend of Chinese clothing output

Source: Prospect Industry Research Institute

From the retail point of view, the overall retail sales of the garment industry did not generally drop as output, but in the "warm boiled frog" situation, the industrial growth rate has been declining year by year. According to the "clothing retail industry market outlook and investment strategy analysis plan and analysis report" released by the prospective industry research institute, in 2012, China's apparel industry achieved retail sales of 702 billion 150 million yuan, up nearly 30% compared to the same period last year, until 2016, the industry scale growth rate still had more than 6% level.

In 2017, the growth of retail sales in garment industry dropped to 1.4%, and the annual retail sales volume reached 1 trillion and 35 billion 640 million yuan.

It can be seen that under the new economic situation, it is an indisputable fact that China's garment industry is in a downturn.

Trend of China's clothing retail sales in 2011-2017 years

Source: Prospect Industry Research Institute

Statistics show that in 2018 1-4, the total retail sales of clothing, shoes, hats, needles and textiles reached 450 billion yuan, an increase of 9.70% over the same period last year, and the growth rate was significantly higher than that of the same period last year (+2.6pct).

The retail sales of garment industry outperformed the total retail sales year-on-year, showing a further warming trend.

2012-2018 years retail sales of clothing, footwear, needles and textiles in China and year-on-year growth

Source: Prospect Industry Research Institute

From the perspective of income growth, brand clothing

In 2017, the total revenue growth was 15.14%, higher than the 11.93% growth rate in 15 years and the 4.38% growth rate in 16 years. 2018Q1 income continued to improve, and the growth rate continued to rise to 16.28%.

From the profit index, the two indicators of operating profit and net profit of the parent company have also improved significantly in 17 years, and the growth rate has been greatly improved in the 18Q1 growth rate.

2016 business profit and net profit fell by 6.76% and 4.40% respectively in 2017. In 2017, it reached 8.77% and 3.19%, and the growth rate of 2016 increased to 23.54% and 20.13%.

In terms of industry operation capacity, the turnover of industrial inventories in 2017 was significantly improved, and the goods were digested smoothly in the peak season of 17Q4~18Q1.

Indicators, reflected in the inventory 2016 growth rate is relatively low (2.29%) to show that enterprises cautious preparation, while in 2017, although the stock growth rate increased to 8.13%, but the inventory turnover rate increased, showing that inventory digestion ability improved, inventory pressure gradually reduced.

18Q1 inventories decreased by 1.76% compared with the beginning of the year. Combined with the increase of income growth, the winter clothing digestion was smooth and there was no obvious backlog.

At the same time, the industry's profitability enhancement is reflected in the background of stable gross margin, and net interest rate has continued to rise since 2017.

To sum up,

17H1 confirmed that the operation continued to improve after the recovery, reflecting the double-digit growth of revenue growth for four consecutive quarters, the repair of gross margin and the continuous improvement of inventory turnover.

It should be noted that the recovery of the industry is a continuous cycle. In the short term, on the basis of the 18 years' increase in the base of 17 years, the growth rate of the sales revenue of the companies / sub sectors may be somewhat narrowed. However, the significance of the industry recovery lies in the enhancement of the overall quality of the operation of the industry, thus entering a virtuous circle and bringing about sustained development.

Growth.