Sustained Loss Of Performance Why Daphne Failed To Turn Over?

Recently,

(00210.HK) issued the second quarter 2018 warning.

Announcements showed that the same store sales in the first half fell 9.1%, closing 416 sales outlets.

Early warning said that losses in the first half of the year will be comparable to those in the second half of 2017.

This means that the company's losses in the first half of this year will double more than last year, reaching nearly HK $500 million.

None of the stores failed, and no one was hopeful about Daphne.

Daphne once had a market value of more than HK $19 billion 500 million, but it is now only HK $551 million, and the price per share is only HK $0.34.

Looking back at the three and a half years when Daphne slipped from its peak, there was no sign of turning over. What happened to the "shoe king"?

Former "shoe king"

In footwear industry, there are two known as "shoe king": one is

The other one is

。

There are many similarities between the two companies - they all started as foundries. They launched their shoes brand in the early 90s of last century. They chose to take the first step in the department store to open their own counters.

But unlike BELLE, the Daphne has been positioned in the middle and low level. This positioning difference also determines the development path of Daphne and BELLE.

In terms of products, in order to reduce costs, Daphne mainly relies on its own team to design, with "basic money" as the main body, so that most women shoes die can be universal, through small changes can meet differentiation, this design idea enables Daphne to greatly improve material utilization.

The complete industrial chain cost control plus the advantage of rents, so that the "parity price" Daphne also has a good profit margin.

In terms of channel, because of the lower unit price, Daphne gradually removed the shopping mall counters from the department stores, and placed emphasis on the street stores. After Chen Yingjie became Daphne general manager in 1999, Daphne shifted the channel strategy from agents to self owned stores, which allowed Daphne to react quickly to environmental changes, discount or pfer goods, without having to look at the face of the store.

In this way, Daphne expands rapidly in the mainland with the number of 300 stores a year.

In 2005, Chen Yingjie judged that with the emergence of more and more communities, public consumption habits were moving from department stores to community business circles, so the brand new "shoebox (shoe cabinet") was created and opened in communities and supermarkets frequented by the public.

In the fashion Daphne, S.H.E is the brand spokesperson. It really makes more money to open stores. In order to focus on women's shoes business, Daphne closes all Nike brand outlets in 2009. In 2010, it directly gave up the renewal of mainland Adidas sports shoes dealer qualification.

。

Low price relative

As well as the industrial chain that is controlled from production and processing to terminal sales, Daphne has become the "shoe king".

At the most brilliant time, Daphne has sold nearly 50 million pairs of women shoes every year, and its market share in China has been close to 20%.

This means that every 5 pairs of women's shoes in China come from Daphne.

At the peak of 2012, the total number of Daphne stores reached 6881.

However, after 2012, Daphne began to go downhill.

At that time, almost all the clothing companies in China encountered the "midlife crisis": brand aging, products are not fashionable, ordering mode led to backlog of inventory, manpower, property and circulation costs rose, and were affected by the electricity supplier.

Daphne, too, has a single category, and the cost of design and development at the beginning of the year has come back.

Sales volume will not lead to inventory backlog, cost increase, compression profit space, "shoe king" in the mire.

Why is Daphne getting deeper and deeper?

Transformation is an inevitable consideration.

Looking back on the resurgence of domestic apparel enterprises in the past few years, who will clean up faster, and who will be able to embrace consumers faster?

Basically, the inventory of domestic apparel enterprises has been completed in 2017. After that, the prosperity of the entire textile and garment industry has been rising.

As mentioned earlier, most of Daphne's stores are direct stores, which should enable Daphne to perceive the changes and adjustments of the surrounding environment faster, but Daphne is getting deeper and deeper.

Since the peak of 2012, Daphne has begun to close its stores, and its revenues have also begun to decline. Gross margins and net interest rates have continued to decline. In 2015, 2016 and 2017, Daphne lost 379 million Hong Kong dollars, 819 million Hong Kong dollars and 734 million Hong Kong dollars respectively.

A major reason for the continued decline in gross profit is that Daphne's average selling price continued to decline.

In 2012, it fell by 10%. In 2014, the number of units fell, and in 2015 it fell by 4.6%. In 2016, it fell 4.8% to 159 yuan, and 2017 was also 159 yuan.

And the corresponding decline in gross profit is that sales costs continue to rise.

After 2015, sales cost was higher than gross profit, selling price decreased and sales cost increased. Daphne's net profit was attacked by two sides.

In recent years, Daphne has accumulated more than three thousand outlets, but the layout of stores is not large, especially in the four to six tier cities.

Daphne has been using one to six lines of cities in the market, and there is hardly any concern for consumers in the earnings report. It seems that the main consumers of Daphne have not changed much, which also reflects the essence of Daphne channel brand.

But in other words, in order to maintain revenue and inventory clearance, other clothing enterprises often turn off a second tier city store and turn into a channel sink.

92% of Daphne's stores are directly operated, and the sinking channels have been paved more thoroughly. Why can Daphne not make use of them?

Back to the point, another reason for Daphne's fall is in inventory clearance.

From the chart above, Daphne's stock accounts for a steady proportion. That is to say, although the inventory has dropped, the relative pressure has not changed. The slow cleaning action is a conservative wrong game.

In addition, the provision of Daphne stock increased year by year, which means that the stock structure of Daphne has not been optimized.

Clothing enterprises often choose the electricity supplier channel to deal with inventory quickly and in batches, such as vip.com.

Although Daphne ranked the first among the women's shoes category in 2014 and 2015 eleven, Daphne's earnings report has not yet made a separate channel disclosure, which shows that the proportion of the total revenue is limited.

This may be a historical reason. As early as 2006, Daphne had already begun to try the e-commerce business. But in 2010, it decided to work with Baidu to invest in the electronic commerce platform, "Yao point 100". At the end of 2011, the Daphne electric business department, under the guidance of the high level, shut down the advantage distribution channels such as Jingdong, Le Tao and hi Le, and turned to support 100.

As a result, "Yao point 100" failed, and Daphne also missed the bonus period of the electricity supplier.

Clearing the line is completely different from online.

Discount will damage the brand value, many brands often destroy or cut the inventory, nor let it flow into the market, but Daphne has long been a discount sale in the stores. If you match a music or a big horn, it will be a brand image in the mud.

When new products enter, they are always enveloped in such a shout, and it is hard to get sales boost.

Moreover, stores selling inventory will inevitably squeeze new product sales space, which has plunged into a dead stock cycle.

If you don't make money, you can burn money. Now Daphne is blocking the hole in its business.

In 2017, the net cash flow of Daphne's business activities was HK $-3.05 billion. If the business situation did not improve and went on like this, the old Daphne would burn down.

From 2011 to 2017, Daphne's average accounts payable turnover days increased from 68 days to 121 days, apparently in the accounts.

It is worth mentioning that Daphne's debt ratio is not high. In 2017, the debt ratio was 27%, and the 99% was current liabilities. In addition to most of the accounts payable, only 156 million of the bank loans, and then Daphne's slow turn, Daphne management is not ready to work harder?

The era of channel brand has long passed, and the problem of Daphne is obviously not only the high cost of channel, but also the problem of brand and product. If we need to stabilize the gross profit, we should do a good job in product design, put the price up and cover the cost of sales.

More problems in Daphne management leadership.

The proportion of Daphne Direct stores is so high that it will put pressure on itself when the business is weak. But Daphne should also feel more pain. Direct stores are their own "wrist". If Daphne is willing to change, the resistance must be much smaller than those of the "order + dealer" mode.

Daphne's self rescue

Daphne is also self rescue, executives change and do some marketing activities, from its actions, Daphne tends to choose to rebuild brand image.

The first is the "two generation" succession.

In May 17th last year, Daphne group announced that CEO Zhang Zhikai was also chairman of the group while Chen Yingjie, former chairman of the group, resigned.

Zhang Zhikai is the son of Daphne group's co founder Zhang Wenyi, and Chen Yingjie is Chen Xianmin's nephew of the group's co founder, Zhang Zhikai and Chen Yingjie as cousins and Chen Xianmin nephew.

In 2016, Chen Yingjie invested in the talent show "the bee girl team". She also started a girl fashion magazine "vivi Meimei" with Japanese publishers.

The TV program ended up losing 26 million yuan.

After taking office, Zhang Zhikai began to innovate the storefront and LOGO, and returned to the shopping center to rebuild the brand image through the shopping center environment. According to the new team's plan, Daphne will continue to increase the proportion of shopping center stores nationwide this year. The ideal proportion is that shopping centers can account for four to 50% of the total channel.

In August last year, Daphne launched a joint venture with Opening Ceremony, a New York buyer's shop brand, hoping to become "fashionable". This year's cross-border cooperation has been placed high hopes.

Daphne focused its marketing on younger consumers, young girls aged 20 and above.

But Opening Ceremony is in China.

The popularity is quite low, and to be honest, and feel the breath of fashion.

You know, since 2010, street breeze and sportswear have been more frequent in fashion week. This fashion movement or sports fashion trend, from Stan Smith to fashion week T station as a node, plus the promotion of core brands, characters and culture, is changing the mainstream aesthetic of young people continuously.

Lining and Anta have gone on a sports vogue free ride, but Daphne may not be prepared to keep up with the wind. Daphne executive director Zhang Zhiqiao once said: "Daphne can not become a fashion brand completely. Its historical brand value still has a cost-effective public shoes, and the market can not completely overturn it."

The implication is that Daphne can't do it.

We must continue the low price route.

Maybe this is good for Daphne.

Since the brand is hard to "hold high", we should choose to embrace low price market.

In the major business platform search, in the fight to see more of the figure of Daphne.

Daphne loves to fight, but it doesn't necessarily win.

From the sales point of view, Daphne is still playing a lot.

Does this mean that Daphne brand can be salvaged? It may not be long before Daphne will appear in good clothes store, love stock or other WeChat electric providers, which is more imaginative than using poor design to knock off "cost performance".

Although it affects brand image, it is good for business.

At first glance at the market value of Daphne, there may be an idea of why it is so low, whether it is underestimated or underdone.

The stock that can not be sold can not create profits, and will continue to backlog and consume funds. Closing stores directly will not necessarily recover the cost.

Without sales, the more production, the more losses, and Daphne has no "surplus value"?

In the 2017 annual report of Daphne group, Zhang Zhikai wrote: "like all difficult tasks, business pformation and pformation usually bring short-term pains before they generate their earnings."

Is it a labor pain? A feeling: until now, Daphne has not found the right way.