Is It Possible To Tear Down The Middle And Low End Labels?

01361.HK is heading for the second tier market.

In August 20th, it released the interim results for the 2019 fiscal year. In the first half of 2019, the company's revenue increased 7.29% to 3 billion 237 million yuan, gross profit increased 5.33% to 1 billion 323 million yuan, and net profit rose 9.66% to 367 million yuan.

Compared with the net profit in the second half of 2018, it dropped by 33.5%, and the performance of the 31st quarter of 2019 increased significantly. In response to the interview with the China times, a group of 316 stakeholders said: "the group has given the commodity story through the cooperation with the building, the Gundam and the cross fire line, attracting the young mainstream consumers, and bringing the high quality business increment."

Looking at the earnings report, we found that the revenue of the two core businesses of footwear and clothing has risen, and sales of footwear and clothing have increased by 3.8% and 12.1% respectively. Footwear sales fell from 45.2% to 43.7%, while clothing sales increased from 40.1% to 41.9%. The growth momentum of sportswear market mainly comes from footwear demand and will continue to focus on footwear business in the future.

It is worth noting that as at 15 hours in August 21, 2019, the total market capitalization of HK $360 was about HK $3 billion 205 million, compared with HK $5 billion 680 million in 2016, and its total market value has shrunk by about 45%. At present, the market capitalization of other domestic sports brands such as Anta, Lining and XTEP are HK $168 billion, HK $50 billion 600 million and HK $13 billion 800 million respectively, and the market value of XTEP is only 1.9% of Anta's. For this gap, 360 degrees did not comment.

It was due to the continued downturn in performance that a brand new remodeling plan was launched in 2018. In the earnings report, 360 degrees indicated that the current 20% of the mainstream consumers occupied 70% of China's total retail consumption, and this proportion still has a further expansion trend. To this end, the group will take brand, product, activity and other perspectives as the foothold of brand remolding.

According to the financial data, as of June 30th this year, a total of 5444 core brand stores were set up, of which about 73.9% were independent street shops. About 74.9% of the stores are located in three or less cities in China, while 6.6% and 18.5% stores are located in China's first and second tier cities.

In the next three years, we will operate 1000 basketball courts in a second tier city and close to the most extensive mass sports market through "basketball into the community". We hope to pull the main force of consumption from the middle and low end market to the first and second tier cities.

Insiders pointed out that the 31st degree shift to a second tier city means a positive confrontation with Nike and Adidas. Besides having to face the problem of higher cost, the 360 degree itself does not have a unique competitive advantage in basketball.

331 degrees responded to reporters: "the 31st degree to enter the first and second tier market is the hope that there will be more links with the mainstream middle class consumers in the future, so as to enhance the business quality and profitability of enterprises. In view of the insight of mainstream young middle class consumers, brand driven commodity storytelling, such as Gundam and CF, is welcomed by the market. In addition, we are going deeper into the cultural symbols that young people like, developing the cultural value of IP products and integrating them into commodities.

At present, 360 degree owns 331 degree brand, 360 degree children's clothing and ONE WAY brand, aiming at the domestic mass market, children's sports and high-end outdoor sports market. In the first half of this year, the revenue of children's clothing business increased by 6.6% to 388 million yuan, accounting for 12% of the group's revenue during the same period.

The 360 degree children's wear business started in 2010. It is a pioneer in the industry and has been operating as an independent business department. Its products are located at medium and low price. In the first half of this year, the growth rate slowed down, up by only 6.6% compared to the same period last year, and the growth rate reached 14.7% in 2018.

In this regard, the average wholesale price of clothing products increased, resulting in an overall average wholesale price increase of 8.8%, while sales fell 2.1%.

In the earnings report, 360 degrees revealed that the group held the 2019 winter and 2020 spring order meeting, the order has achieved an ideal increase, and the future income of children's clothing business will grow. Thirty one degree children are making efforts to layout the youth football market. Statistics show that in June this year, 360 degrees had announced cooperation with Hengda football school and Beijing Zhong He Guoan training football.

"The future group will further promote brand remolding, provide consumers with high value mass professional sports products, provide enough technology, concise design and world-class quality." These people told reporters.