AOKANG International: A Deep Understanding Of Consumption Changes Driven From Inside To Outside

On the evening of August 27th, AOKANG International (603001.SH) released its interim results report. The first half of this year achieved operating income of 1 billion 325 million yuan, and net profit of 95 million 491 thousand and 200 yuan, which was reduced compared with the same period last year. The net cash flow generated by operating activities in the first half of this year was 21 million yuan, an increase of 17.52% over the same period last year. On the whole, influenced by the upgrading of consumption and the downside of the economy, the performance of AOKANG international in the first half of the year, though affected to a certain extent, is taking the opportunity to accelerate the transformation and upgrading of AOKANG international through product upgrading, channel upgrading and multi brand operation, so as to explore the way for the future.

According to the semi annual report, AOKANG international firmly determined the talent team's determination to face the future: AOKANG international first implemented the share repurchase program in September 11, 2018, and completed the buyback in August 13, 2019. It has actually repurchased 18 million 190 thousand shares, and the total amount of funds used is 193 million yuan. According to the repurchase share scheme, the purpose of this repurchase stock is: 50%~60% is used as equity incentive and the remaining 40%~50% is used as ESOP.

Explore the way to accelerate the transformation and upgrading of endogenous power in the future

According to the overall economic situation, according to the macroeconomic data released by the National Bureau of statistics in the first half of 2019, the total retail sales of social consumer goods reached 19 trillion and 520 billion yuan, and the actual price growth increased by 6.7% after deducting the price factor. Among them, the retail sales of clothing shoes and hats and needle textiles were 656 billion yuan, up 3% compared with the same period last year, and consumer demand continued to be weak.

As can be seen from the above picture, from 2015 to 2019, AOKANG's international revenue and performance in the first half of the year have declined to varying degrees, mainly due to the new retail economic shock that the traditional footwear industry has suffered. Especially in the first half of 2019, due to the overall weakness of the macro-economy and the continued weakness of consumer demand, the traditional shoes and clothing industry was more impacted. In the process, AOKANG international constantly optimized the layout of the channel through the transformation and upgrading, resulting in a decline in revenue.

From the perspective of industry comparison, except for Wanlima's interim announcement, the performance of A shoes and hat sub sectors listed only increased on Saturday. The performance of other enterprises has declined to a certain extent over the same period last year, which is basically consistent with the changing trend of the industry environment.

As can be seen from the above picture, the operating income of AOKANG International Men's shoes and women's shoes in the first half of the year was 777 million yuan and 423 million yuan respectively, accounting for 58.65% and 31.93% of the total operating revenue respectively, and leather goods achieved 112 million yuan in business income and 8.46% in total operating revenue. This also shows that AOKANG international still has a solid foundation in the high-end consumer market.

Channel upgrading to create new experience consumption experience

Under the guidance of innovation driven strategy, new technology detonates new industries, new formats inspire new vitality, new modes expand new paths, new consumption creates new changes, thus leading consumers into the era of big consumption. Nowadays, with the upgrading of consumer cognition and the transformation of core consumer groups, "after 90" is becoming a major consumer group. Creating personalized products and increasing experiential consumption scenes has become a major trend in the development of traditional footwear industry.

Based on this change, during the reporting period, AOKANG international has created a new terminal image of the new generation of "AOKANG life Pavilion" and "Kanglong original designer shop", providing consumers with integrated, scene based experiential consumption. At the same time, AOKANG international tried the brand licensing mode for the first time, and set up partner management mode, extending the core of AOKANG shoes brand, extending the supporting products category and integrating product resources.

In addition, AOKANG international focuses on improving the efficiency of single store by evaluating the market capacity and competitive advantage of the cable sub store. According to semi annual reports, in the first half of the year, there were 82 new stores and 104 entities in AOKANG international, and 132 stores and 144 stores were closed to direct stores and distribution entities. Meanwhile, as of the end of the reporting period, AOKANG international has 33 distribution stores in Vietnam and Kuwait. From the quantity point of view, the total number of physical stores in AOKANG international has decreased, but by continuously optimizing the distribution structure of each brand entity store and eliminating the economically inefficient stores, AOKANG International's single store income has further improved.

From the point of view of sales channels, AOKANG international takes the mode of "direct sales + distribution", and sells sales mode supplemented by group buying, export and online sales. In the first half of this year, the independent store achieved 580 million yuan of revenue and 41.56% gross profit margin, an increase of 1.52 percentage points compared to the same period last year. The business income of the mall reached 138 million yuan, gross profit margin was 47.43%, an increase of 1.59 percentage points over the same period last year, and group buying and online shopping achieved 224 million yuan of business income and 32.66% gross profit margin, an increase of 3.84 percentage points over the same period last year.

However, for the online business, in the first half of 2019, AOKANG international hot social retail hotspots focused on creating a social retail outlet in the era of full contact. The new retail online business continued to push forward, and worked closely with Tencent's smart retailing to achieve WeChat's payment of courtesy, friends and circle advertising, and so on. In the future, AOKANG international will continue to explore the social retail section, based on the "people goods field" full scene mode, giving full play to the fission effect of the new retail business, and at the same time deepening the member operation to realize the deep interaction between consumers' identifiable, touchable and operational basis, and optimize the membership consumption experience. According to semi annual report, AOKANG's online sales revenue in the first half of the year was 183 million yuan, an increase of 13.88% over the same period last year.

Multi brand operation to meet individual needs of consumers

With the adjustment of consumption structure, consumers no longer simply pursue consumption symbols, more consumption is a "return to reality" experience. In short, consumers are starting to pursue a trend of consumption from luxury to self display, from demand satisfaction to meaningful consumption, from classic to personalized fashion. During the reporting period, AOKANG international implemented a multi brand operation mode supplemented by AOKANG's own brand, Kanglong, Cage and Puma. From the concrete results, in the first half of the year, the "AOKANG" brand realized 844 million yuan of business income, gross margin of 37.7%, an increase of 2.21 percentage points compared to the same period last year; the Kanglong brand achieved a business income of 210 million yuan, a gross margin of 37.45%, an increase of 0.34 percentage points over the same period last year; the "Si Cage" brand achieved 98 million yuan of business income and 37.98% gross profit margin, an increase of 2.35 percentage points over the same period last year.

In view of this, Austrian International has increased R & D investment in the reporting period, focusing on product functions and fashion research and development, and comprehensively promoting product planning, product design, and purchasing group products. In order to meet the needs of consumers' diversity and personalization, we jointly work together with the "IP" to co authorize the products, and cooperate with the famous Footwear Design Institute of Taiwan, "GTS", to design a series of "two generation slipper shoes" series, which aims to attract younger consumers.

Meanwhile, in the first half of this year, AOKANG international also launched the skidding challenge competition and the "bottom dare" attitude marketing around the functions of the series products. In the new product promotion stage, Zhang Li signed as AOKANG's summer image ambassador, created the theme of AOKANG's summer products with the star effect, and reached a strategic partnership with the central fashion master, signing the top international designers, helping AOKANG products in original design.