AB Face: Brand Remodelling Is Difficult And Core Business Performance Is Weak.

Anta, Lining and XTEP, also known as the four largest sports brands in China, have released a 2018 earnings report. Gross margins, operating profit margins and earnings per share have suffered a sharp decline.

Data show that in 2018, the company's total revenue was 5 billion 190 million yuan, a slight increase over the previous year's 5 billion 160 million yuan, but net profit was only 303 million yuan, a sharp decline of 33.5% over the same period last year.

Compared with Anta's net profit of 4 billion 100 million yuan and XTEP's 657 million yuan, the 31st degree has already fallen behind several positions.

Core business performance dived, brand remodeling is facing difficulties.

In the Jakarta Asian Games, Sun Yang, a spokesperson for the 31st degree, did not follow the national team's terms of cooperation and won the award in the Anta sportswear.

Although this has made the 31st degree the focus of world media attention, it has failed to restore the trend of profit decline since then.

In the first half of the year, the crisis approached, and in the second half of 2018, it pushed the brand remodeling plan, including signing with Universal Studios, sponsoring the competition team and sponsoring a series of high-end events. Advertising and publicity expenses increased to 557 million yuan (2017: RMB 507 million yuan), accounting for 10.7% of the company's revenue, up nearly 9.8% from 9.8% in 2017, but little effect was seen afterwards.

In addition to the performance of its children's clothing business and the median growth rate, the core business sector of the 31st degree is embarrassed, the pressure of business is huge, and the most important footwear revenue is reduced by 4.1%.

XTEP annual report shows that its footwear business revenue in 2018 increased by 20.2% over the same period last year.

In the core brand stores, 5808 stores opened in 2017, and in 2018, the situation worsened, closing more than 200 stores and maintaining 5539 stores.

74% of the stores are located in three or less cities in the country, and 26% of the stores are located in the first tier and second tier cities.

In 2017, the figure was 73.5% and 26.5% respectively.

The number and proportion of stores in the most critical tier cities of the brand pformation declined, indicating that the remodeling plan suffered setbacks.

In October 2013, it launched a joint venture with the famous Nordic sports brand One WaySport to expand outdoor ski equipment and riding market in Greater China, similar to Anta and FILA.

In 2018, the number of ONEWAY self operated stores was reduced by 11, with only 35 self operated and 12 franchised stores. At the same time, the inventory of 12 million yuan was also raised. In 2017, the figure was zero.

In the high-end sporting goods market, it has been hard for five years.

First announced overseas revenue, adverse R & D investment will not drop or rise

The overseas sports shoes and clothing market has been the traditional sphere of influence of giants such as Nike, ADI, Andemar and so on. Although Chinese sporting goods companies have tried hard to develop them, their performance has not been satisfactory.

The annual report shows that 316 degrees in Europe, the Americas and other regions, sales outlets, in 2018 entered Australia and Indonesia and other new markets, and for the first time announced the general situation of international business, accounting for 1.8% of the company's revenue in 2018.

This is also the only overseas sporting goods company that has listed the Hong Kong stock market so far. The only disclosure of overseas revenue figures is that it has made some progress in internationalization.

Although the overall performance is poor, the 2018 annual report of the 31st degree is still keeping some bright spots.

In the face of adversity, the management of the company not only did not substantially reduce R & D expenditure, but increased considerably compared with the previous year.

In 2018, R & D expenditure amounted to RMB 215 million yuan, accounting for 4.1% of the annual revenue, compared with 173 million yuan in 2017, accounting for 3.4% of revenue. R & D expenditure was higher than that of Anta sports and XTEP international.

The annual report shows that a total of 767 technicians participated in product R & D activities, of which 462 were footwear R & D personnel.

It is believed that the driving force of the sports apparel market is still mainly driven by the demand for footwear, and will continue to focus on footwear development.

In the annual report, the company's performance decline was attributed to the conservative consumer sentiment of non essential commodities, which led to a reduction in replenishment orders in the second half of the year and a pessimistic attitude.

The annual reports of Anta and XTEP are quite the opposite. They are cautiously optimistic about the sporting goods industry in China.

In 2019, the war of domestic sporting goods industry will continue to blaze. If 331 degrees fail to put forward effective measures on brand remolding, strive to keep pace with consumer demand, hold the three or four line market and maintain a wider distributor network, which will become increasingly competitive.

The company did not receive the supplement in the second half of 2018, which has already illustrated a harsh fact: the market is seriously short of confidence in the 31st degree product, and confidence is gold.