31St Degree "Lag": Market Capitalization, Self Rescue, "Deviation"

Recently, the arbitration hearing of Chinese swimmer Sun Yang's "drug inspection incident" will be held in Switzerland, and the arbitration result will be announced on a selective date. However, the 31st degree of the stock price dropped sharply. What happened?

In November 14th, after the opening of the Hong Kong stock market, the share price of 1361.HK fell sharply, plunging 38.13% to HK $0.99, a record low. As of the end of 14, the price was HK $1.33 per share, and its market value was HK $2 billion 750 million.

A day earlier, the company announced that KPMG had resigned as a company auditor. The board of directors decided to appoint Dahua Ma Shi Yun certified public accountants company as the new auditor of the company since November 13, 2019.

In response, media reports said the 31st share price crash was related to the replacement of auditors. On the 31st level, the company did not comment on the company's stock price volatility. The reason for the replacement of the auditor was stated in the announcement. At present, the company operates as usual.

In fact, apart from the sharp drop in share prices, the downturn has also become a topic of discussion. In particular, in recent years, the scale of the domestic sports apparel market has been expanding. In the background of Anta sports and Lining and other peer enterprises, how can we get out of the predicament?

Performance fell behind, with a market value of only 1.3% of Anta's.

It is one of the four major sports brands of China, compared with Anta and Lining. This year, it is listed at 10th anniversary in the 31st degree, but embarrassing is that the company is facing a sharp decline in share prices and weak performance growth.

From the earnings report, the performance of the 360 degree downturn has long been lagging behind from peers. Revenue growth in the 2015-18 year was 14.1%, 12.6%, 2.7%, 0.6%, respectively. In 2018, the revenue of 360% was 5 billion 187 million yuan, and net profit fell 33.5% to 304 million yuan. In contrast, Anta, Lining and XTEP revenue in 2018 were 24 billion 100 million yuan, 10 billion 511 million yuan and 6 billion 383 million yuan respectively, representing an increase of 44.4%, 18.5% and 25% respectively.

In addition to the almost continuous growth in performance for many years, the core business of the 31st core company also performed poorly. In 2018, its most important footwear revenue was reduced by 4.1%. Compared to the same period, Anta's footwear revenue increased by 22.5% over the same period. By November 15th, the market value of the company was HK $2 billion 750 million, and the market value of Anta and Lining was HK $2010 and HK $57 billion 900 million respectively. That is to say, the market value of 321 degrees is only 1.3% of Anta's, which is 4.7% of Lining's.

While the performance is sluggish, 360 degrees are also shutting down stores and reducing staff. In 2018, the company's main brand stores were 5539, compared with 2017, which was reduced by 269. At the end of 2012, the number of stores was 8082, and the number of stores in 2543 years was reduced by 2543. In addition, the number of employees has also decreased. In 2018, the number of employees in the company was 7992, compared with 8555 in 2017, a decline of 6.59%, compared with 2011, a drop of 20.11%.

In addition, according to the financial union reported earlier, 31st degree was also facing a drop in operating cash flow and continued growth in receivables, with huge cash deposits and huge financial costs. In 2018, the net cash generated by the company's operating activities was 295 million yuan, down 64.55% from the same period last year. At the end of 2018, the total receivables of the company amounted to 3 billion 120 million, accounting for 54.09% of the company's net assets ratio.

The company's bank deposits are 4 billion 500 million yuan, plus cash total 6 billion 478 million yuan; the financial cost is 211 million yuan, accounting for 69.4% of the net profit, compared with 1 million in 2011, the high financial costs undoubtedly add to the company's pressure.

From this point of view, the 31st degree has already left behind in the colleague, and has been in the awkward predicament of main business revenue. The same as a famous domestic sports brand, why is the gap between the 31st degree and the other three companies getting bigger and bigger?

Save oneself many times and run away many times

In fact, looking back at the development of the 31st degree, it is easy to find that the three major sports brands, Anta, Lining and XTEP, were once in the same line. However, due to the repeated adjustment of strategic adjustment in the development process and missed the key opportunities for the development of the domestic sports market, the gap between the 31st degree and the other three is getting bigger and bigger.

In 2008, the domestic sports apparel industry took the ride of the Beijing Olympic Games, ushered in the golden age of development. Since then, several major companies such as Anta, Lining and 31st degree have opened up the road of expansion, rapidly opening stores in the whole country, running horses, encircling large quantities of goods, and investing heavily in advertising marketing.

After 4 years of extensive expansion, by 2012, the sports apparel industry bubble disappeared, profits fell sharply, and encountered inventory crisis. According to Caixin statistics, only the first half of 2012, Lining, Anta, XTEP, XTEP and other 42 listed clothing enterprises total inventory amounted to 48 billion 300 million yuan.

Against this background, sportswear enterprises are closing in. In 2013, the industry's leading Lining's net profit dropped sharply, and its share price dropped from nearly HK $30 to HK $5 in 2012. The number of stores dropped sharply by 952 compared with the end of last year. It also closed 256 stores nationwide. In the same year, 31st profit also declined, and stores closed more than 200.

Faced with the industry dilemma, the major sports apparel enterprises have adopted the "factory store" direct selling method to promote sales and reduce the number of stocks, which undoubtedly damaged the brand image. It also lacks the same strategic vision and takes the same measures, resulting in declining performance and brand damage.

Anta and Lining, who are in deep crisis, quickly found their brand positioning after a period of adjustment, and got away from the difficulties and gradually developed into the leading industry. But in the process of self rescue, the 360 degree is running away again. In 2014, with the development of the electronic commerce platform, 360 degrees, like other brands, focused on the electricity supplier market, which could have accelerated the rush with the help of the online traffic entrance. However, the careful consumers found that 321 degrees tended to take the store's tail cargo and offline retail sales of low-priced products to the line. Such a move, though solving inventory problems, is no doubt self destroying brand.

Unable to take advantage of the electricity supplier dividends, 360 degrees tried to reshape the brand, get rid of the local flavor, and promote brand awareness through sports marketing. By the end of 2018, there were more than 10 spokesmen in 361, including swimmer Sun Yang and singer Tan Weiwei and Wei Chen. In the year, the advertising cost of the company was 557 million yuan, accounting for 10.7% of the total revenue, but only promoted 0.3% of turnover. In addition, it also sponsored the Nanjing Youth Olympic Games in 2014 and Jakarta international competitions in 2018.

More importantly, these marketing behaviors are not consistent with the brand positioning of 331 degrees. According to the distribution of stores, by the end of 2018, there were 5539 stores in 31st degree, 74% of which were located below three line cities, and 7.4% in the second tier cities, 18.6% in total. Compared with the 26.5% of the second tier cities in 2017, the ratio of 321 degrees to big city stores also declined.

Looking back at competitors, Anta has embarked on the development of multi brand by acquiring FILA, SPRANDI, KINKOW and Amer Sports. It insists that a second tier city open a large store to make high-end products of FILA, the layout of low-end products in three or four tier cities, and brand, R & D, online and offline sales, and so on. And Lining is catching up with the tide of the country, but the 31st degree stays in the three or four line city brand.

The loss and pain of traditional brands

In fact, whether it is sportswear brand or the rest of the brand, almost will encounter the problem of brand aging and transformation in the process of development.

In recent years, the domestic shoe and shoe market has been enough to explain the problem. Recently, due to the decline in performance, it has closed the store's La jalbbell, the top one billion debt of noble birds, the high position BELLE, the bankrupt rich bird, and the Daphne with huge losses. These brands, like 360 degrees, failed to make a smooth transition like Anta, and were in trouble because of their own mistakes.

The blue whale financial reporter has seen many traditional brands' development process and interviews with practitioners, and found that these transformations do not conform to the common characteristics of the brand: they have not found new economic growth points, failed to catch the young consumer groups, and misunderstood the online logic.

Take the 31st degree, the garment industry analyst Ma Gang believes that the sports shoes market is highly concentrated and has been separated from the big brands such as Anta, Lining and Nike. Anta and Lining are seeking new growth points through the acquisition of transformation fashion. Against this background, it is hard for the rest of the brand to split up and get a slice of it.

On the other hand, after 90 and 95, it has become the main consumer group. Whether the industry leader or micro enterprises, should be based on the characteristics of consumption to promote their own products and adjust sales strategy. Compared with Anta's acquisition of fashion product lines, and the use of multimedia and FILA series to create the image of sports and fashion, Lining developed national fashion costumes and embarked on fashion week and other measures.

321 degrees are still prone to sports products upgrading, traditional advertising endorsement, sponsorship and other ways, the market reaction is slow, missed the young group.

In the face of fierce competition from the channel, many brands have begun to adjust their strategies and take the online as the main sales channel. However, these brands believe that sales conversion rate can only be achieved by marketing and product packaging. Instead of using Anta and Nike to adopt IP and create explosive funds, it caters to the needs of young consumers.

During the double eleven period this year, Anta invited the popular star Chen Feiyu to broadcast live in addition to the "11.11 meteorological observatory" concept. It has also launched seven popular IP products including NASA series, Coca-Cola joint shoes, "Dragon Ball super" joint series, KT basketball series, man Wei series, Olympic country tidal wave, Huang Jingyu FILA and the same DESCENTE of Daniel Wu DESCENTE.

Data show that this year's double eleven, Anta only 1 hours and 21 minutes turnover will exceed 1 billion, exceeding NIKE. Among them,

IP cross-border new products occupy more than 90% of Anta's "double eleven" activities, attracting more than 100 million people's attention.

It can be seen that, as Charlie Danson, a former operator of Nike, said, the development of brand needs to be operated and innovating, and it needs more insight into the needs of consumer groups.