Net Profit Fell Sharply, Can La Natsu Bell Smooth Losses Into Profits?

"China's first A+H share women's clothing company" and "China Version ZARA", the La Natsu Bell clothing Limited by Share Ltd of Shanghai (hereinafter referred to as "La Natsu Bell") once had a limelight without two. However, since 2019, La Natsu Bell has once again aroused investors' heated discussions due to various customs, such as a large number of shops, rental headquarters buildings, sub brands for bankruptcy liquidation and so on.

In addition, La Natsu Bell's business has also increased investor concerns. The third quarter 2019 report showed that La Natsu Bell's operating income in the first three quarters was 5 billion 757 million yuan, down 7.2% compared with the same period last year. Net profit attributable to shareholders of listed companies was -8.25 billion, a decrease of 444.7% over the same period last year.

So why did La Natsu Bell's net profit suddenly drop sharply? Is it true that the average daily closing of 13 homes is true? Is it true that companies are abandoning their brands and leasing their headquarters buildings because it is difficult for them to turn around? In response to these problems, the reporter recently contacted La Natsu Bell and received some responses.

　　 Half a year to reduce 2470 outlets

According to public information, La Natsu Bell was established in 1998 and went to Hong Kong in October 2014. In September 2017, he landed on the Shanghai Stock Exchange successfully and became the first "A+H" clothing brand in two places. At this time, La Natsu Bell's ambition and prospectus shows that "we plan to build 3000 new retail outlets in three years".

According to the prospectus and periodic financial data, La Natsu Bell's retail outlets were 6887 in early 2014. Under the guidance of the business development strategy of "multi brand and direct business oriented", the number of retail outlets of the company has increased rapidly. By the end of 2017, the number of La Natsu Bell's cabinets had risen to 9448, only one step away from "10000 shops".

However, the strategy of rapid expansion of direct channels has also brought challenges such as rising costs and unexpected profits. After a short span of a year, La Natsu Bell began to "shrink" strategically. According to the 2018 annual report, the number of retail outlets under its line did not grow as planned, but reduced to 9269.

Since then, the number of La Natsu Bell outlets has begun to decrease with the adjustment of its strategy. According to the 2019 China daily data, the number of retail outlets in the first half of La Natsu Bell was 6799, down 2470 from the end of last year. It is not only smaller than the beginning of 2014, but also far away from the ambition of "3000 new retail outlets".

In response, La Natsu Bell said, "the company has taken the initiative to implement the strategy of" shrinking "strategy. It has carried out a comprehensive assessment of the outlets of the terminal channels, closed down and adjusted some of the losses and inefficient stores and brands, and plans to retain 6000 outlets within the country. We hope that we can continuously optimize the offline outlets, reduce the ineffective investment of resources, and further enhance their operational efficiency, so as to enhance the company's profitability.

In addition, La Natsu Bell also raised the hot topic of the market, "13 stores a day," the topic of rumor.

La Natsu Bell told reporters, "the average daily closing of 13 stores in the first half of the year is a wrong statement. First, the number of company stores is calculated according to the number of outlets. That is, like a collection store containing multiple brands, it will be counted as multiple terminal outlets (one shop may contain multiple outlets), and the two is the adjustment of company outlets including closing and internal brand replacement.

　 Over two billion market value evaporated

"The road is the peak." La Natsu Bell's high light seems to be in 2017.

Reporters combed the previous performance report, we can see that since 2014 in the Hong Kong Stock Exchange listing, to 2017, La Natsu Bell's performance is still good, and basically maintained a steady growth; but from 2018, the company's performance began to decline.

Wind data show that La Natsu Bell's operating income rose from 6 billion 209 million yuan in 2014 to 8 billion 999 million yuan in 2017, and net profit attributable to parent company dropped from 503 million yuan to 499 million yuan, a slight decline. The operating income in 2018 was 10 billion 176 million yuan, although it successfully broke through the 10 billion yuan pass, but the net profit attributable to the parent company in the same period was positive and negative, with a loss of 106 million yuan, down 132% compared with the same period last year.

This year, La Natsu Bell's operating income has declined for three consecutive quarters. Data show that the first three quarters of the company's operating income was 2 billion 372 million yuan, 1 billion 579 million yuan, 1 billion 806 million yuan, respectively, down 6.94%, 13.73%, 0.85%.

On the whole, La Natsu Bell's total business income in the first three quarters was 5 billion 757 million yuan, down 7.16% compared with the same period last year; the net profit attributable to parent company was -8.25 billion yuan, down 444.69% compared with the same period last year; the net profit decline of the parent company after the deduction was more obvious. The first three quarters were -9.13 billion yuan, down 645.20% compared to the same period, and this figure was 465 million yuan in 2014.

In addition to revenues and net profits, La Natsu Bell's inventory balance has also been questioned. Periodic reports show that the company's inventories surged from 1 billion 327 million yuan at the end of 2014 to 2 billion 345 million yuan in 2017. Since then, this figure has remained above 2 billion yuan, and the stock in the first three quarters of 2019 was 2 billion 199 million yuan.

In view of the company's high inventory balance, La Natsu Bell explained that "because the company mainly adopts direct sales mode, it needs to maintain a large quantity of merchandise with sufficient color and size to meet the needs of store display and consumer selection. Therefore, compared with the women's clothing enterprises which mainly take the franchise mode, the company needs and has a relatively high level of inventory.

However, as we all know, the fashion industry is influenced by the trend of popularity very much. In recent years, with the fast fashion brands emerging frequently, the speed of fashion changing is faster and faster. If you want to digest your stock as quickly as possible, you can only discount it by way of discount. However, large-scale discounts will not only directly affect corporate profits, but also impact on brands.

As a result of performance changes, La Natsu Bell A shares in the two tier market performance is not satisfactory. Wind data show that its stock price reached the highest 28.03 yuan per share in October 16, 2017, and its total market value reached 11 billion 897 million yuan. After that, the share price went down all the way. As of November 13, 2019, the stock closed at 4.15 yuan / share (prior to the restoration of power), with a decrease of 84.65% and a total market value of only 1 billion 650 million yuan. That is to say, in just two years, La Natsu Bell's market value has evaporated more than ten billion yuan.

　　 Focus on enhancing core brand competitiveness

To add insult to injury, the explosive growth of stores has also increased La Natsu Bell's debt pressure. According to Wind data, La Natsu Bell's current liabilities rose from 2 billion 573 million yuan at the end of 2014 to 4 billion 720 million yuan at the end of 2018, and the figure in the first three quarters of 2019 was 5 billion 319 million yuan.

In addition, from the recent balance sheet, we can see that La Natsu Bell's short-term loans in the first three quarters of 2019 and the non current liabilities due in one year were 1 billion 466 million yuan and 412 million yuan respectively, but the monetary fund was only 235 million yuan in the same period, and the debt repayment pressure was not optimistic.

In the face of performance losses and debt pressure, La Natsu Bell began to "break arm to survive".

In May 8, 2019, La Natsu Bell announced that the company intends to sell the 54.05% stake of the controlling subsidiary, Agel Ecommerce Ltd Hangzhou (hereinafter referred to as "Hangzhou dark"). It is understood that Hangzhou was founded in January 2010, the main marketing and sales of seven grid, OTHERMIX and OTHERCRAZY and other online apparel brands, its revenue in 2018 was 515 million yuan, net profit of 69 million yuan.

In October 17th, La Natsu Bell announced again that the company holding subsidiary Jack Walker (Shanghai) Garments Co., Ltd. (hereinafter referred to as "Jack Walker") continued to lose money and could not continue to operate. It intends to apply for bankruptcy and liquidation to the people's court. According to the periodic report, as of June 2019, Jack Walker's assets totaled 120 million yuan, and liabilities totaled -3.75 billion yuan; in the first half of 2019, the revenue was 91 million yuan, and the net profit was -0.89 billion yuan.

It is worth noting that in the La Natsu Bell holding company, Jack Walker is not the only insolvent subsidiary. The semi annual report of 2019 shows that La Natsu Bell has 7 subsidiaries, of which the assets of only 3 subsidiaries of Shanghai micro dress limited, Shanghai raxia management company and the newly added Naf Naf SAS are more than liabilities.

La Natsu Bell told reporters that the company is now planning to accelerate the liquidation of its long-term assets and increase the intensity of its investment projects. In the future, we will focus on improving core brand competitiveness, adhere to the development strategy of multi brand differentiation, and focus on the development of women's clothing brands.

What is puzzling is that while implementing strategic contraction, La Natsu Bell has increased investment in overseas assets. The announcement shows that La Natsu Bell acquired French Naf Naf SAS40% stake in 20 million 800 thousand euros in June 2018. In a short span of a year, in June this year, the company again returned the remaining 60% stake in the brand with 35 million 340 thousand euros. According to the 2019 China daily data, Naf Naf SAS's revenue in the first half of the year was 139 million yuan, and its net profit was -0.15 billion yuan.

Close down inefficient stores and outlets, sell sub brands, liquidate losses, and even rent group headquarters office buildings in Minhang District, Shanghai, can see La Natsu Bell's determination to save himself, but if we want to smooth the losses of the company, we still have a hard way to go to La Natsu Bell, who is at the stage of transformation.