XTEP Is Restless: Will The Two Years Decline In Performance And Cooperation With Foreign Brands Open The High-End Market?

The runner's world is constantly breaking through himself and reaching with hard heart to punch cards one after another.


After three years of hard spanformation and dormant period, XTEP International (01368-HK) ended two consecutive years of revenue and net profit decline, and handed in a handsome 2018 performance report: group revenue grew 24.8% to 6 billion 383 million 200 thousand yuan (the same below), making it the best in history. Net profit rose to 60.9% yuan to 665 million 600 thousand yuan. The turnover days of receivables were reduced from 130 days in 2017 to 105 days.


It is proposed to issue a final dividend of HK $9.5 per share, together with an interim dividend of HK $10.5 per share, with an annual dividend increase of 53.8% to HK $20 per share and a dividend payout ratio of 60%.


In fact, in 2015, XTEP opened a difficult three year spanformation. Under this influence, the company's overall performance in 2016 and 2017 has declined. Looking back on the three years' history, we can see clearly the past and present of XTEP.


From the point of view of income, in the three year spanition period from 2015 to 2017, although only a slight decrease of 5.3% in 2017, the net profit in 2016 and 2017 dropped 15.2% and 22.7% respectively in 2016 and 2017. In 2018, as the first year's financial report after three years of spanformation, the net profit of the parent company increased by 61% compared to the previous year.


In terms of net interest rate, it also extended the trend of net profit to mother, which declined continuously in 2016 and 2017, and then rebounded smoothly in 2018. However, from the point of view of gross margin, it may be possible to find out the smooth progress of XTEP's three years' spanformation in advance, and the gross profit margin continued to increase in the three years from 2015 to 2017.


With the change of the retail industry, XTEP has adapted to the changes of the industry like a runner and made a positive adjustment. In the past three years, the wholesaler mode has been adjusted to the combination of retail and O2O, which has been dominated by the total generation. In 2018, e-commerce sales accounted for more than 20% of the total revenue.


At the same time, XTEP has strengthened direct data collection for retailers, and can quickly optimize production plans according to market sales and inventory conditions.


From "inflow" to "the preferred brand of domestic runners"


In the past, XTEP was a running shoe for positioning the fashion movement. In short, it was unprofessional. In the words of Ding Shui Bo, a pair of sports shoes participated in all sports. In 2018, China held more than 1500 marathon competitions, an increase of about 50% compared with the same period last year. This is the first in the world either in terms of speed or total number. Under the situation of "runaway" awakening of domestic runners, a pair of sports shoes can no longer meet the needs of individual professionals.


The domestic running circle is highly social. Even a runner who is accustomed to running alone will see word of mouth from the Internet runners' exchange communities, look at the evaluation, and find suitable boots, especially in young runners. Therefore, the promotion of running shoes requires the combination of brand awareness, hard technology of running shoes and word of mouth, so that a pair of suitable running shoes can be delivered to the hands of suitable people.


In 2018, XTEP international sponsored 42 important marathons and running events. It is the biggest sponsor of the marathon race in China. The competitors wearing XTEP racing shoes were awarded the prize in the contest. This not only increased the exposure, but also proved the hard strength of XTEP running shoes to runners.


At the same time, the XTEP running club, which is specially designed for runners, is also established. By the end of 2018, more than 123000 members had been involved. Members could share with each other, share their experiences in running, and recommend good shoes for each other.


In 2018, XTEP launched one of the most popular running shoes in the country, breaking 1 million sales in two months.


Next "punch card" -- promoting multi brand strategy


The runner's world is constantly breaking through himself and reaching with hard heart to punch cards one after another. The "restless" XTEP has just made a fall in its performance in 2018. It has announced the promotion of multi brand strategy in a high-profile manner, and has worked with a century old Wolverine group to jointly introduce Wolverine, one of the world's top four running shoes, Saucony and the world's best selling outdoor footwear brand Merrell, into a joint venture.


Drawing lessons from the successful development of multi brand in Anta sports (02020-HK), XTEP took the road boldly and boldly. The newly added brands of Saucony and Merrell will mainly open stores in the first and second tier cities, which are complementary to the three or four line city layout of XTEP's products, and will be built into a series of running shoes with high, medium and low ends.


However, does the multi brand development strategy mean more expenditure for XTEP? We also see that in the 2015 to 2017 years of the three year spanformation period, the performance of XTEP has basically declined, and the performance has only increased in 2018. Will the multi brand strategy increase the pressure on performance again?


At the performance conference, XTEP CFO Mr. Yang Lubin did not think this problem should be worried. First of all, in the early stage, XTEP only invested 150 million yuan to cooperate with Wolverine in the operation of Saucony and Merrell brands in Greater China, and the introduction of such a price to two international sporting events is very substantial.


At the same time, Yang Lubin also said that next year, next year, XTEP's e-commerce team will first help Saucony and Merrell sell existing products, which will not bring much cost, and will contribute to small profits. This year, we will set up a research and development team to develop the shoes in line with the Chinese market. It is expected to open the flagship store in the beginning of next year, and then cooperate with online e-commerce to open sales.


It is estimated that in the first year (2020), each brand will have 30 to 50 stores, and each brand should have 200 stores in third years. The first two years' loss is also controllable. Between 20 million and 3000, the loss will also be cut off from Wolverine. Fourth, fifth years will usher in the outbreak, bringing considerable revenue contribution. In the next fifth years, 400 to 500 stores are expected to open for each brand.


The signing ceremony of XTEP's cooperation with Wolverine is detailed in the report of the financial community. "Can we get into the high-end market with the international brand Saucony?" "


XTEP's "running soul awakening"


If XTEP completed the spanformation of three years from a running little white into a runner enthusiast, then the introduction of the international sports brand and the opening of the multi brand strategy symbolized that XTEP finally took the number plate and marathon's athletic field, and became a formal athletic athlete.


In the two metamorphosis, XTEP only gives itself a year's rest time, which may inevitably bring about stage pains, adjustments and adaptations. However, is it not the spirit of the runner who constantly breaks through his comfort zone? Compared with standing in place, a XTEP who dares to face challenges and forge ahead can be accepted by the running circle. In fact, this is also the brand spirit of running shoes that can be highly regarded.


At the press conference, XTEP international chairman Ding Shuibo and CFO Yang Lubin answered questions from reporters.


Q: what is the reason why this year's dividend rate dropped from 103% last year to 60%?


A: (Ding Shuibo) 2017 is so high because of a 10th anniversary special dividend. After excluding this part, the dividend payout in 2018 is still increasing. In terms of industry, XTEP's dividend payout ratio is above 50%, which is relatively high.


At the Q:2017 performance conference, Ding Zong once said that there were 300 stores to open in 2018, and 200 stores actually opened in 2018. What are the reasons? And the goal of opening stores in 2019.


A: (Ding Shuibo) 200 to 300 stores are not only quantity but also quality. The new store opened in 2018 has a better single store image and greater experience space. The target of opening stores in 2019 is still between 200 and 300.


Q: will XTEP continue its acquisition of multi brand strategy this year?


A: (Ding Shuibo) acquisition is bold thinking, but cautious. We probably saw 55 takeover targets last year before deciding to cooperate with Wolverine. The first is because the cost is relatively low, and 150 million of our investment is a very small investment for tens of billions of cash on hand. Second, the advantage of XTEP running shoes is in the mass market and the three or four line cities. With the increase of national income, the demand for high-end running shoes and outdoor shoes will increase in the future. Saucony and Merrell are much more than us in product R & D, but they are not familiar with the Chinese market. Our perfect sales channels can help them promote the high-end market of the first and second tier cities. The two sides cooperate to introduce shoes that are more in line with the Chinese market, and also help reduce prices.


Q: will the subsidy to the total generation be maintained this year? Do you have the latest data for the 2019 order meeting?


A: (Yang Lubin) the total generation of XTEP has completed the spanformation to the retail direction now. Subsidy is a kind of investment behavior. In order to encourage them to open stores, especially to enter ShoppingMall, they can order more goods. We have not disclosed the order for a year or two. Now we will flexibly adjust the delivery speed and production according to the market conditions.


(Ding Shuibo) added that the total generation subsidy is mainly on renovation and renovation, and the frequency and percentage of 2019 will drop as a result of the 2018 large scale renovation and renovation.


Q: how much is the sales revenue of the e-business platform? How to differentiate between Saucony and Merrell products and XTEP products?


A: (Ding Shuibo) the electricity supplier accounts for over 20% of the total sales, and this proportion will still be maintained in 2019.


The price of XTEP is mainly from 180 yuan to 280 yuan, and Saucony and Merrell are between 400 yuan and 600 yuan. This is a totally different consumer group, so there is no impact on each other.