Net Profit Is Expected To Drop Significantly By 360 Degrees. How To Tide Over The Painful Period Of Strategic Pformation?

Recently, a profit warning was issued at the end of 2018. At the end of the year of fiscal year, a preliminary assessment of the unaudited consolidated management accounts and the current information was made. The board now estimates that the group's net profit after tax will fall sharply compared with the end of 2017.

By the middle of 2018, the performance of the company has been more brilliant.

In this regard, the Board believes that the main reason is the brand remodeling plan.

It is understood that the 31st degree brand remodeling plan has been implemented and will be released in mid 2019.

According to the insiders, the strategic adjustment is also aimed at coping with the increasingly fierce competition of local sports brands and the revenue target of ten billion yuan to meet the 10th anniversary listing on the Hong Kong stock exchange.

For the 31st degree, strategic adjustment is imperative and full of challenges. How to speed up the painful period is a question before us.

Net profit is expected to fall sharply

The Beijing Business Daily reporter recalled that in the three quarter of 2018, the retail sales volume of 31st degree main brand products in the three quarter of 2018 (calculated at retail value) increased over the same period in 2017.

The retail sales of 331 children's clothing brands in the three quarter of 2018 (at retail value) increased by a double digit percentage over the same period in 2017.

The retail sales of the main brand products in the fourth quarter of 2018 (at retail value) were flat compared with the same period in 2017.

The retail sales of 360 children's brand products in the fourth quarter of 2018 (at retail value) increased by a double digit percentage over the same period in 2017.

In the mid 2018 earnings report, the revenue of 31st degree increased by 7.82% to 3 billion 17 million yuan, and the profit attributable to shareholders increased by 5.27% to 335 million yuan over the same period last year.

Industry analysts pointed out that sales of core brand products were flat, which is the worst growth rate in the past four years.

The reason for the sharp decline in earnings is also explained in the announcement, which is due to the group's expected loss in the second half of 2018.

Among them, the consumption intention of the Chinese mainland for non Essentials (such as the group's products) is relatively conservative, so that the replenishment orders are reduced; the group implements logistics management optimization plan within the year and rearranges the delivery schedule.

In the view of the 31st degree board, the sharp decline in net profit in the second half of the year was not only due to the brand remolding plan, but also reduced the group's total orders in 2018, and continued to depreciate against the US dollar in 2018, resulting in a loss of foreign exchange at 360 degrees. In addition, the advertising business and publicity expenses increased, and the 360 degree e-commerce business made a big loss in 2018.

"The sales revenue of sporting goods industry in China has been on the rise since 2012, but by 2017, there has been a slight decline. In the first half of 2018, there has been a rebound, and the growth rate has slowed down in the second half of the year.

Therefore, from the perspective of the development of the whole industry, the 31st degree is the lower end of the overall development curve.

Guo Bin, Secretary General of the national sports industry research base of Peking University, said that a significant drop in profits was due to the overall impact of the industry. There were also some reasons for itself: first, the product did not maintain enough stickiness for the consumers, and the product could not sustain the brand vitality. Secondly, it was related to the adjustment of the 31st degree strategy, and the development efforts and intervention of the key markets were not enough. For example, the investment in the clothing and apparel equipment market, the professional running market and the outdoor sportswear equipment market was insufficient. These markets were the fastest growing consumer market in 2018.

Cheng Weixiong, general manager of textile and clothing management and Shanghai Liang Qi Brand Management Co., Ltd., believes that one of the reasons for the situation is that the local economic downturn began to show pressure on brand performance last year. On the other hand, we can see from the loss that the sales performance of the 31st degree store is low, leading to a decrease in gross profit; meanwhile, the shoe and clothing products series in the second half of 2018 failed to achieve the expected sales target; in addition, we can see that the operating cost has risen sharply from the loss, and the labor cost, rental cost and cost amortization cost have increased, which is related to the expansion of the 361 degree direct store.

In particular, he pointed out that "the 31st degree electricity supplier business and offline entity store business have not yet fused, and the cost of electricity supplier flow is also rising", which is also one of the important reasons for the sharp decline in profits.

Local third racing race

Founded in 2003, it is a comprehensive sporting goods company integrating brand, R & D, design, production and distribution. Its products include sports shoes and clothing and related accessories, children's wear, fashion and leisure.

In June 30, 2009, 31st degree was listed on the Hong Kong stock exchange. As a domestic sports brand, it only took six years in the traditional sports industry from the establishment of the brand to the listing.

In the same year, the strategy of multi brand operation was established, and the children's clothing was set up at the age of 3-12.

Invest in the Asia Pacific market jointly with the famous Nordic outdoor brand ONE WAY.

At present, 360 degrees has become one of the leading sports brand enterprises in China, and Anta, Lining and XTEP are among the top four sports brands in China, occupying half of China's sports market.

From the market value, by the end of 2017, Anta ranked first in the Chinese sports brand with HK $103 billion, equivalent to 6 Lining, 11 XTEP and 20 31 degrees; it was about 70000000000 HK dollars more than Lining, XTEP and 31st degree market capitalization.

Judging from the performance, as of the end of 2017, Anta sports achieved 16 billion 690 million yuan in revenue, an increase of 25.1% over the same period last year, and the profit attributable to shareholders increased by 29.4% to 3 billion 90 million yuan. XTEP's international revenue decreased 5.2% to 5 billion 113 million 400 thousand yuan, and net profit fell 22.7% to 408 million 100 thousand yuan.

In this regard, because of market value, volume, performance and product price difference is not much, 31st degree and XTEP's wrestling is the most intense, the two brands have been competing for the domestic sports brand third position.

The sales platform on Tmall can also show the strength of XTEP and XTEP.

The Beijing Commercial Daily reporter registered at 31st Tmall official flagship store.

In the flagship store, there are 5 million 220 thousand fans in 31st degree, the highest sales of which are 360 degrees 2019 spring new ventilate running shoes, the price is 129 yuan, as of press time, more than 5300 people have paid for them, while second of the products are paid for nearly 2500 people.

Compared with XTEP Tmall official flagship store, the flagship store has 6 million 350 thousand fans. The highest selling product is XTEP men's shoes 2019 spring and summer new sports shoes running at the price of 139 yuan, and 17 thousand people have already paid for them. Second of the products sold in the store have nearly 9500 people.

Compared with Anta and XTEP, there is still a lack of outstanding advantages on the track of local sports brand competition.

Cheng Weixiong believes that Anta is already a leading enterprise, and its comprehensive products are more cost-effective. XTEP has a clear positioning, from leisure sports to sports and leisure, focusing on the running market; Adidas and Nike have more brand competitiveness.

Therefore, 321 degrees will still need more efforts in brand positioning and technology development in the future.

Strategic pformation is a double-edged sword.

At present, 360 degree has embarked on a new development strategy.

In December 2018, 31st degree STAPLE launched the first series of "shell breaking" products of M1 degree RO, which was co operated with DESIGN M1, a famous design studio in Shanghai.

From the slogan of "extraordinary splendor" to design, visual effects and communication mode, the degree of difference is different from the past.

The move has also been interpreted by the industry as a new brand image and strategic approach to the outside world.

Zhu Minjie, senior vice president and chief marketing officer of the 31st degree group, said in an interview with the media, "I want to take it as the beginning of remodeling of the brand."

The "brand remolding" mentioned by Zhu Minjie refers to the brand remodeling plan which will be released in the middle of 2019.

In this regard, Beijing Business Daily reporter contacted the relevant person responsible for the interview, but as of press time, the other side did not reply.

Although change is exciting, people are full of vision for the future, but change is also a double-edged sword.

It is better to remain unchanged than to remain unchanged.

As a listed company, the problem is how to rush through the throes of strategic adjustment.

An unnamed practitioner told the Beijing Commercial Daily that the primary problem to be solved in the future is the difference between the target customers and the actual consumer groups: "the young consumers who locate the love movement are actually three or four line middle-aged or elderly students or groups of students.

If you do not recognize your customers and do not get close to their actual needs, you will not be able to meet the needs of consumers.

In addition, operation mode, talent echelon, management mode and brand promotion are all needed to be solved quickly.

In the face of the future, Cheng Weixiong also put forward his own proposals for "360 degree": "learning from experience can not blindly follow suit, and need to integrate into the enterprise's own situation and gradually enter into the pformation instead of cutting across the board, so that under the premise that the enterprise's own team and capital management capability is not perfect, it is easy to pay a greater pformation cost, and the business risk brought by it increases sharply.

It is imperative that we need to clarify our own business capabilities, redesign our brand strategy, balance our international business and domestic business, and focus on domestic business.

Guo Bin once again mentioned the problem of "human". He said frankly that 360 degrees needed to find the real consumers of the products.

At the same time, we should expand the new business model and try to cross border sales, with the help of net red and focus events, to enhance product intelligence, technology and fashion.