La Natsu Bell "Makeup Remover": Financial Data Behind Abnormal Losses

La Natsu Bell, a clothing brand listed by A+H, fell to the altar. The net loss in 2018 was 160 million yuan, down 132% compared with the same period last year.

On the company's explanation of "three reasons for the loss of macro, poor mode and poor sales", compared with the performance of a group of peers, "macro bad" seems to be untenable.

But judging from its anomalous financial data, the pattern adjustment also seems to be doubtful.

In April 2019, the Shanghai Stock Exchange issued an annual inquiry letter to La Natsu Bell, which covered many problems.

After the two delay, in early May, the company replied to the inquiry letter.

A detailed reading of these two documents may help to understand a more realistic La Natsu Bell.

"A+H" listed on the two sides of the clothing brand La Natsu Bell fell to the altar.

The net loss in 2018 was 160 million yuan, down 132% compared with the same period last year, and the net loss was 245 million yuan, down 164.43% compared with the same period last year. This is La Natsu Bell's achievement in the first full year of A share market.

In 2018, what happened to La Natsu Bell? According to the company's bulletin and earnings data, "the poor macro, the wrong mode, the poor sales" became the three reason for its loss.

Is this really the case?

In 2018, what happened in the clothing industry? Consulting A shares, vicknus, Taiping bird, di Su fashion, song and so on, a number of interbank companies' earnings reports, all achieved a year-on-year increase in revenue and profits.

Almost all of them are losing money.

It is right to say "wrong mode" and "ineffective sales".

Over the years, La Natsu Bell has pursued a strategy of rapid expansion, and the number of stores directly under the line has doubled.

In the company's prospectus for 2017, the most important investment project is expansion.

But after the listing, the company immediately implemented strategic contraction, and in 2018 became the first year of net decrease in stores.

By the end of the first quarter of 2019, the number of stores decreased significantly, compared with 1616 at the end of 2018.

Is this just the case?

There are many anomalies in financial data, such as cost out of control, changes in inventory and receivable prepayment.

In the strategic contraction of 2018, La Natsu Bell should have been more healthy "physique", but appeared "deterioration".

Business perspective can not understand, capital operation as you open another window.

Before La Natsu Bell's A share was listed in 2017, it strongly argued in the prospectus that "financing expansion" would bring about sustained growth in performance, just as it had done before.

The company predicted that profits in the first three quarters of 2017 increased by 1% to 10%.

In September 2017, La Natsu Bell's A share listing program, which had been in operation for many years, was finally realized.

However, in the fourth quarter of the year, the net profit of the company decreased by 23.19% compared with the same period last year, and the net profit of the company decreased by 53.3%. The net profit and net profit of the company in 2017 decreased by 6.29% and 19.53% respectively.

The rapid change of face is rare for A share companies.

This is the first quarter after La Natsu Bell's A share listing, which became the prelude and epitome of the collapse of the 2018 performance.

In April 2019, the Shanghai Stock Exchange issued an annual inquiry letter to La Natsu Bell, which covered many problems, directly referring to the financial authenticity before and after the listing of the company and the commercial rationality of frequent switch shops.

After the two delay, in early May, the company replied to the inquiry letter.

A detailed reading of these two documents may help to understand a more realistic La Natsu Bell.

Bizarre loss

In the overall upward trend of the industry, La Natsu Bell experienced an adverse trend deficit. In the 2018 year, the net profit was 245 million yuan, down 164.43% from the same period last year.

On the evening of March 28th, La Natsu Bell disclosed the 2018 annual report.

The company's net loss in the 2018 year was 160 million yuan, down 132% compared with the same period last year. The net loss of non net profit was 245 million yuan, down 164.43% compared with the same period last year, and its operating income was 10 billion 176 million yuan, an increase of 13.08% over the same period last year.

For losses, La Natsu Bell's explanation can be summed up in three parts: "the macro is not good, the mode is not right, and the sales are not enough."

First look at the macro situation of the industry.

In May 9th, La Natsu Bell's reply to the inquiry letter of the Shanghai Stock Exchange annual report clearly showed the performance of 7 listed companies of the same grade and clothing brand in 2018.

Of the 7 peers, 6 achieved double growth in revenue and performance.

Only the day of fashion is profit decline, but no loss.

At the same time, the income scale of the daily fashion is located in the last echelon of A apparel brands, and its performance decline is very small compared with that of La Natsu Bell.

In addition, we can see in La Natsu Bell's "sales and growth of clothing retail products nationwide", although the growth rate has slowed down after the rapid development stage, the overall retail industry in China still keeps growing.

In other words, in the overall upward trend of the industry, La Natsu Bell experienced an adverse trend deficit.

La Natsu Bell's latest report shows that in the first quarter of 2019, the company's operating income decreased by 6.94% compared with the same period last year, net profit decreased by 94.4% compared to the same period last year, and net profit declined by 129.5% compared with the same period last year.

Runaway costs

In 2018, La Natsu Bell's expenses not only decreased but increased sharply, while sales expenses, management fees and financial expenses increased by 38.52%, 29.51% and 216.42% respectively.

Why did La Natsu Bell lose money?

Analysis of the company's 2018 financial data shows that the company's losses are mainly due to the increase in costs.

According to the survey, the company's annual sales expenses surged to 6 billion 32 million yuan, up 38.52% from the same period last year, accounting for 59.28% of the total revenue.

In addition, the management cost of the company in 2018 was 504 million yuan, up by 29.51% compared with the same period last year, and the financial cost was 52 million 465 thousand yuan, up 216.42% from the same period last year.

Why are these costs increasing?

Check the company's business.

In 2018, La Natsu Bell began a comprehensive strategic contraction.

According to the annual report, the company opened 1132 new outlets, and closed 1311, the total number of outlets to 9269, a year-on-year net decrease of 179.

From 2015 to 2017, La Natsu Bell's stores grew by 1006, 1014 and 541.

"Generally speaking, for a clothing brand, opening a shop means decoration, hiring, stocking, entering, etc., which is reflected in the financial statements, namely, increased revenue, increased costs, increased inventories, and profit depends on business conditions.

Closing stores means less revenue, less costs and fewer inventories.

A listed garment company official told reporters.

In contrast to La Natsu Bell's data, the proportion of company's sales expenses in revenue from 2015 to 2017 was 45.62%, 47.31% and 49.39%, respectively, which were lower than 59.28% in 2018.

That is to say, only selling expenses, La Natsu Bell lost control when he closed the shop.

What is the performance of other listed companies in the same industry?

In the reply to the inquiry letter, La Natsu Bell listed the sales cost of the industry company in detail.

From the cost situation, the company's sales cost rate is higher than the other 7 peers.

La Natsu Bell explained: "the company adopts close to the whole direct operation mode, while acquiring the value of the retail terminal, it also bears the sales cost of the retail terminal, while other companies in the industry usually use the combination of direct and franchisees, so the related selling expenses of the company are significantly higher than those of other industries."

The reporter looked at other companies' annual reports in 2018, and found that there were 511 shops in the women's clothing business of the group, including 378 self owned shops, 127 distribution outlets, 6 online channels, a relatively high self owned shop, a 35.94% sales fee in 2018, 23.84% sales growth over the previous year, 1285 stores at the end of 2018, and 101 stores in Vigna S, a clothing company based on direct sales, and 41.03% sales in 2018, an increase of 25.98% over the previous year.

La Natsu Bell's explanation does not seem objective.

In the inquiry letter of the Shanghai Stock Exchange, it is also clearly stated that the company's supplementary disclosure requires the company to disclose the specific reasons and reasonableness of the significant increase in sales expenses in the case of a decline in operating income and a decrease in the number of stores. It is required that the company explain that the sale of the shopping mall / electricity supplier in the sales cost is 1 billion 378 million yuan (the previous period does not have the item), confirming whether the sales cost is in conformity with the relevant accounting standards, and requiring the company to combine the financing arrangements and liabilities structure to supplement the specific reasons and rationality for the growth of the financial expenses; and to ask whether the company's supplementary disclosure has the existence of the intertemporal recognition cost and the cost, and whether it involves the correction of the relevant accounting treatment.

For sales expenses, the store / electricity supplier's buckle point occurred 1 billion 378 million yuan, La Natsu Bell explained in reply letter, because of the impact of the new accounting standards, originally also had this cost, but as a deduction of business income, so the sales cost "looks" suddenly increased.

The reporter looked up the announcement of similar enterprises in the same period, and found that in 2018, only Hai Lan's home was adjusted by the relevant accounting standards.

However, in the annual report of Hai Lan home 2018, similar "shopping mall / electricity supplier" points have not been found.

Besides, aside from the cost of "shopping mall / electricity supplier deduction", La Natsu Bell's other expenses are increasing.

In the reply letter, the company said that the increase in staff costs was 53 million yuan compared with the same period last year, mainly due to the increase in labor costs in the total stores in 2018, and the long-term amortization expenses increased by 96 million yuan compared with the same period last year. The main reason is that the company combed all the stores in December 2018, and accelerated the amortization of the long term deferred expenses corresponding to the shops closed and ready to close in 2019, which led to a sharp rise in the amortization of the long-term cost of the fourth quarter in the fourth quarter of 2018.

Anomalous expansion

La Natsu Bell's single store sales revenue has long been declining, and its opening up strategy is just a "facade project" that does not increase profits.

That is to say, the expansion strategy before listing is more like using capital purchase channels to force income growth.

Why is La Natsu Bell's financial data abnormal in 2018? How does this relate to the company's business strategy and listing plan?

In the 2017 A share prospectus, La Natsu Bell said it would use IPO to raise funds to add 3000 new outlets in the next 3 years.

As a fast fading clothing brand, with the trend of low consumption and high level of industry and electricity supplier, La Natsu Bell adheres to "tradition" to maintain the growth of business performance through expansion of outlets, and has maintained the momentum of high-speed opening since 2011.

In terms of the number of stores, it has reached the first place among similar casual wear brands.

In the prospectus, La Natsu Bell began to contract the expansion, but began to shrink after the listing.

La Natsu Bell replied in his reply letter: "affected by multiple factors such as uneven development of different regions and business circles, growth of online shopping, and rising rent levels of shopping centers and department stores, the company will close some stores according to actual business conditions."

"Since 2018, due to the sharp decline in offline sales, the pressure of excessive fixed cost expenditure under the company's direct mode has been highlighted, which is also an important reason for the company's loss in 2018."

In fact, over the years, sales of La Natsu Bell's single store have long been declining.

This indicates that its opening up strategy is merely a "facade project" that does not increase profits.

Looking at the key financial data of La Natsu Bell in the past 7 years, we can see that the sales scale of each brand is directly proportional to the number of shops. The sales scale of the group is slightly higher than that of the number of shops. This shows that the growth of the company's old stores is weak, and the company relies on a large number of new stores to drive the growth of its performance.

La Natsu Bell's unthinkable expansion strategy before listing is more like using capital purchase channels to force its income growth.

The exchange said in the inquiry letter, "since 2014, the number of entity stores at the end of the year is 6887, 7893, 8907, 9448, and 9269, which has changed considerably". It also requires the company to disclose the reason and rationality of the large-scale opening of Direct stores. The company will, in the light of the pre operation and future plans, explain the progress, efficiency, opening time, whether the distribution of frequent closing stores and stores in the short term is consistent with the previous plans, and whether the economic benefits predicted will change with the previous stage.

And La Natsu Bell's reply is: because the company did not raise the 1 billion 556 million yuan capital needed for the capitalization of the store construction, it actually raised 321 million yuan for the investment in the project's liquidity.

The investment in liquid funds can not account for the progress and benefits of the corresponding stores. At the same time, the item company has not made any economic forecast in the prospectus for the expansion of retail network.

In summary, the use of funds raised by the company is in line with the previous plan and there is no deviation between the efficiency of the use of raised funds and the economic benefits predicted.

In a word, the capital raising expansion plan mentioned in the prospectus does not count.

Strange listing

In the first quarter after landing on the A share market, the performance of the company went down sharply, but in its A share prospectus, it had vowed to declare that its main business is promising.

Why is the change so dramatic?

Since 2015, La Natsu Bell has barely achieved income growth through expansion.

On the whole, there is no increase in profits, gross profit margins and net interest rates.

In La Natsu Bell's initial public offering of A share prospectus, the company has vowed to declare that its main business is promising.

At that time, the company announced in the prospectus that the operating income from January 2017 to September was 6 billion yuan to 6 billion 300 million yuan, an increase of about 6.98% to 12.33% compared with the same period last year, and net profit from 320 million yuan to 350 million yuan, an increase of 1.13% to 10.61% compared with the same period last year.

Dramatically, after the first quarter of the company's landing on the A share market, that is, the fourth quarter of 2017, the company's performance plummeted.

La Natsu Bell 2017 annual report shows that the company's net profit and net profit in 2017 dropped by 6.29% and 19.53% respectively.

According to the data, the net profit of the company in the fourth quarter of 2017 decreased by 23.19%, and the net profit of the company dropped by 53.3%.

After the listing of the performance of the rapid change, A shares rare.

The increase of La Natsu Bell's stock also reflects the decline of the company.

By the end of 2018, the stock balance of the company was 2 billion 534 million yuan, an increase of 8.1% over the same period last year, accounting for 29.16% and 48.6% of the total assets and current assets of the company at the end of the year.

Inventory income ratio is the core index of clothing enterprise's health and competitiveness.

According to prospectus disclosure, La Natsu Bell inventory balance in 2016 compared with 2015, a decrease of 1 billion 710 million yuan, this data in the company's rapid expansion is very benign.

The company's inventory income ratio was 20%.

But after its listing in 2017, the company's stock balance increased sharply to 2 billion 340 million yuan, and the inventory income ratio was 27%, and it continued to grow in 2018.

Why is it so dramatic before and after the listing? Does La Natsu Bell rely on offline expansion to achieve revenue growth before he exists in IPO, relying on postponing cost recognition and optimizing the profit statement?

Frequent chaos

The frequent departures of management, the pledge of large shareholders, the financing of contradictions, and so on, provide another evidence for the company's financial uncertainty.

Along with the financial data before and after La Natsu Bell's listing, the phenomenon of frequent departures, large shareholders' high proportion pledge, and inconsistent financing after the listing provide evidence for the company's financial suspicion.

As a sub A share issue, La Natsu Bell is not a new person in the capital market.

In October 2014, La Natsu Bell was listed on the Hong Kong stock exchange, with a net capital of HK $1 billion 606 million.

In October of next year, La Natsu Bell submitted the A share prospectus. After fruitless, he again sprinted A shares IPO in 2017. The fund-raising and investment projects were the same as the 2015 prospectus, which was consistent with the purpose of raising funds for Hong Kong listing - 90% of the proceeds were used to expand the retail network.

In September 2018, when La Natsu Bell listed for just a year, he wanted to issue 1 billion 530 million yuan of convertible bonds.

In December 2018, the company reduced the scale of convertible bond raising to 1 billion 170 million yuan; in February 2019, the company announced the termination of the convertible bond plan.

However, La Natsu Bell announced in January this year that it would issue a medium-term note or ultra short term financing certificate of not more than 400 million yuan.

Such a rapid pace of continuous fund-raising, people can not help but worry about its financial situation.

By the end of 2018, the number of shares directly or indirectly controlled by Xing Jiaxing, the company's real controller, amounted to 34.16%.

Among them, xingjiaxing's equity pledge ratio is as high as 87.92%.

La Natsu Bell also appeared a vision of frequent turnover of executives.

In September 2017, La Natsu Bell A shares went public. A month later, three people, including Li Jiaqing, Wang Haitong and Zhang Yi, quit the board of directors. In December of the same year, Wang Yong, executive director and executive vice president of the company, executive director and executive vice president Wang Wen Ke, the non executive director Cao Wenhai resigned. In June 2018, vice president of the 3 months just resigned, and in August, the Secretary of the board of directors resigned.

To the surprise of the outside world, La Natsu Bell, who was saddled with losses, recently decided to sell one of its most important subsidiaries.

On the evening of May 7th, La Natsu Bell announced that the company intends to pfer to Hangzhou Yan Ye Enterprise Management Consulting Co., Ltd. (the company linked to natural person Cao Qing holds 100% of its shares). The 54.05% stake in Hangzhou's Agel Ecommerce Ltd (referred to as "Hangzhou dark") is pferred, and the share pfer price of the paction is 200 million yuan.

According to the 2018 annual report, Hangzhou is one of La Natsu Bell's few major earnings controlling companies, and net profit of 69 million 66 thousand and 600 yuan in 2018.

According to the investigation, Hangzhou is involved in La Natsu Bell's early 2015 investment in e-commerce enterprises.

At that time, La Natsu Bell bought about 45% of his registered capital and invested $65 million in 135 million yuan.

After the completion of the paction, La Natsu Bell held a total of 54.05% shares in Hangzhou, which cost a total of 200 million yuan.

4 years later, La Natsu Bell sold Cao Qing to Hangzhou at the original price, giving generous generosity to his partners, leaving behind dismal business data and small shareholders who sighed and sighed.