Enterprise Privacy: "Fans Economy" Supports The Profit Of Jiangnan Cloth Profit But Relies On Subsidies?

Jiangnan Buyi (03306) announced a three day increase in performance after its announcement, which has risen more than 19%, more than two months in the Hang Seng Index. It did not begin to turn downward until March 4th.

In order to stimulate the share price to rise sharply in such a short period of time, according to the brightest financial results, Zhitong finance learned that in the 6 months ended December 31, 2018, the total income of Jiangnan cloth clothing was 2 billion 27 million yuan (the same below), an increase of 22.6% over the same period last year.

Gross profit was 1 billion 240 million yuan, an increase of 20.2% over the same period last year.

Net profit in the period was 381 million yuan, an increase of 22.1% over the same period.

The basic profit per share is 0.74 yuan, and the interim dividend is 0.28 yuan per share.

The announcement indicates that the increase in revenue is mainly due to the rapid expansion of group retail network, e-commerce business and new business.

In just six months, the total number of independent retail stores in the south of the Yangtze River increased by 163 to 1994.

Member account growth driven performance

As we all know, Jiangnan cloth is regarded as the first-class fan economic operator in the domestic designer's brand. Relying on the precise strategy of "fans economy", Jiangnan cloth clothing has accumulated a large group of high sticky fans in the development process over the past 20 years.

With the increase of membership size and membership stickiness, the company's performance has also increased year by year.

In December 31, 2018, the number of accounts in the south of the Yangtze River has increased to more than 3 million 100 thousand. In the first half of fiscal year 2019, the proportion of retail sales contributed by the members accounted for about 70% of the total retail sales.

The number of fans directly determines the company's performance.

In 2018, the number of active member accounts was more than 395 thousand. In 2018, the number of member accounts totaling more than RMB 5000 yuan was over 182 thousand. Compared with over 140 thousand in 2017, the number of member accounts continued to grow, and its retail sales reached 2 billion 170 million yuan, which contributed more than the total retail sales under 40% lines.

The main reason why Jiangnan cloth is so "absorbing powder" is brand influence.

Since its inception, the company has continuously launched new brands to meet the individual needs of different segments of consumer groups.

Diversification of designer brand portfolio, in turn, makes Jiangnan cloth income steady growth trend.

Zhitong finance understands that Jiangnan cloth clothing is only facing the women's clothing market when it was born in the west of Hangzhou. At the very beginning, only the brand JNBY was designed. After 20 years of fission, the men's clothing CROQUIS, children's wear JNBY by JNBY, women's wear less, teenage dress Pomme de Terre and home JNBYHOME were gradually developed. In 2018, the professional men's wear designer brand SAMO, fashion environmental brand, and designer brand collection shop were also launched.

As of December 31, 2018, there were 9 independent designer brands in Jiangnan Buyi.

2019 in the first half of fiscal year, the income of mature brand JNBY increased by 19.1% over the same period last year.

Growth and portfolio brands, including CROQUIS (sketch), jnbyby JNBY and less, which have been launched in the period from 2005 to 2011, continue to grow rapidly, with revenues of 402 million yuan, 285 million yuan and 151 million yuan respectively, with a total growth rate of 26.8%.

The original brand portfolio, including the 2016 teenager designer Pomme de Terre (Peng MA) and designer household goods brand JNBYHOME, earned 24 million yuan and 4 million 900 thousand yuan respectively.

Changes in channel structure lead to a decline in gross margin

At the same time, the number of shops also increased. The total number of independent retail stores in the south of the Yangtze River increased from 1831 in June 30, 2018 to 1994 in December 31, 2018, together with 161 sales outlets distributed abroad. The retail network of the company covers all provinces, autonomous regions and municipalities directly under the central government and 17 other countries and regions in the world.

Among them, the mainland shops are mainly distributed in two or three line cities.

At the same time of expansion, Jiangnan cloth and clothing control the cost better, sales and marketing expenses accounted for 29.8% of revenue, down 1.7 percentage points from the same period last year, the company said, mainly due to good sales channels and market cost control.

From the point of view of sales channels, Zhitong finance noted that in recent years, the sales growth of the lower reaches of the Jiangnan cloth line has slowed down, and the proportion of total revenue has declined year by year, while the online channel is just the opposite. The income growth rate has accelerated, and has become a driving force for the company's revenue growth, and its share of total revenue has also increased year by year.

In the first half of fiscal year 2019, revenue from offline channels including self run stores and distribution stores totaled 1 billion 805 million yuan, an increase of 19.22% over the same period last year, while the scale of online channel revenue was only 220 million yuan, but the growth rate reached 57.1%, and the proportion of total revenue increased to two figures.

The gross profit margin of online channels also rose faster, with only 38.6% in fiscal year 2016, and 60.8% in the first half of 2019.

It is worth mentioning that, because of the change of channel structure, that is, the proportion of self operated channels under the relatively high gross margin is decreasing, and the overall gross profit margin of the company has reversed the trend of continuous rise from 62.6% to 61.4%.

Although Jiangnan cloth has won the favor of many fans with its unique design style, ITC has observed from its cost structure that the clothing design service charge and sample expenditure are 24 million 844 thousand yuan, which is not high in total expenditure.

From this perspective, this is also one of the advantages of Jiangnan cloth clothing compared with other designer brands.

On the other hand, as a sales company, Jiangnan cloth will not be "stingy" in promotion and marketing, and the promotion and marketing in the period will be 78 million 832 thousand yuan, up 24.8% over the same period.

Subsidies affect the "nerve" of net profit.

Investors who have long tracked the cloth in Jiangnan should not forget that the last time Jiangnan Buyi announced its performance, the stock price was not the "painting style".

As net profit growth slowed sharply over the same period, share prices tumbled and fell 21% in 4 days.

The "chief culprit" that led to a decline in net profit is that the government subsidy granted during the period decreased by 20 million 508 thousand yuan over the same period last year.

You know, the number of fans in the south of the Yangtze River is still growing. Sticky increase, expansion of stores and the launch of new brands also bring good growth expectations.

All in all, there are no obvious flaws in the fundamentals, but the company's share price is still falling. It is obvious that the market is still concerned about the relevant subsidies in the region even though 2 million subsidies are not much more than more than 400 million of the net profit at that time, the profit growth after the disposable income is 31%.

In the first half of the fiscal year 2019, the government subsidy for the cloth income in the south of the Yangtze River was 36 million 384 thousand yuan, an increase of 87% over the previous year, far exceeding the subsidy for the last full fiscal year.

In the light of last year's situation, if the subsidy for the second half of the fiscal year was maintained at the same period last year, the impact of subsidies on the annual net profit growth would undoubtedly be enormous.

But if this is cancelled or reduced, the negative mood is obviously not a bit.

At the same time, the core of the economy is the brand influence, but several successive plagiarism storms have made the reputation of Jiangnan cloth clothing face the test.

In November last year, the company's women's clothing brand JNBY was suspected of plagiarizing the works of independent designer Chen Peng on Tmall China Japan fashion week. Before that, the CRUQUIS of a men's clothing brand CRUQUIS was forced to go off the shelf because of alleged plagiarism. In September last year, the video taken by women's brand less and creative short film platform NOWNESS was also plagiarized.

This series of turmoil has led to sharp fluctuations in share prices.

As for whether fans' loyalty to Jiangnan cloth brand will change, it remains to be verified by time.