Precious Birds: Difficult Prospects And Worrying Future

Revenue is falling, sales fees and sales rebates increase. Everything shows that the birds have fallen into the brand dilemma.

In 2019, 603555.SH predicted that the net profit attributable to listed companies would be -7.65 billion yuan to -9.15 billion yuan, with net profit of -7.1 billion yuan to -8.6 billion yuan.

This is the company's second consecutive year of substantial losses. After the annual report is officially released, you will inevitably wear your hat.

Brand is in trouble

Up to the end of the three quarter of 2019, the largest shareholder of the Hongkong bird group (AND1) is the largest shareholder of the company. Its shareholding ratio is 76.22%. The company's actual control is Lin Tianfu. The main business of the company is the design, development, production and sale of sports shoes and clothing. The brands include "noble bird", "AND1" and "brand".

In January 2014, the "bird of honor" went on sale, although it rose to a maximum of 69.37 yuan in the short term after the listing, but then it fell all the way, and hit a historical low of 3.16 yuan on the 4 day of February 2020.

You bird is a sports clothing brand located in the three or four line city. As of June 30, 2019, the brand marketing network of the noble bird has covered 31 provinces, autonomous regions and municipalities directly under the central government, and the number of retail terminals has reached 2685. However, from the perspective of store distribution, the store of "noble bird" is more concentrated in the three or four line cities. Among the 2685 retail outlets, there are 287 retail outlets in the first tier cities, 568 retail outlets in second tier cities, 1084 retail outlets in three cities, and 746 retail terminals in four cities.

In the 2014-2018 years, the income of noble birds was 1 billion 920 million yuan, 1 billion 969 million yuan, 2 billion 279 million yuan, 3 billion 252 million yuan, and 2 billion 812 million yuan respectively. Net profit was 312 million yuan, 332 million yuan, 326 million yuan, 188 million yuan, and -6.94 billion yuan. Before 2018, the signs of increasing profits were obvious.

In the first three quarters of 2019, the income of noble birds was 1 billion 169 million yuan, down 49.2% from the same period last year. Net profit was -1.66 billion yuan, down 1134% compared with the same period last year.

And the company's inventory is rising. At the end of the 2014-2018 and three quarter of 2019, the inventory of the company was 211 million yuan, 171 million yuan, 475 million yuan, 492 million yuan, 503 million yuan and 564 million yuan respectively. In the first three quarters of 2019, there was a negative growth of 49.2%, but inventories were still at a record high.

To a large extent, this shows that there is a risk of unsalable sales of the products of the noble birds. If the fact is true, the company should make adequate allowance for impairment.

In 2018, the income of the precious birds was 2 billion 812 million yuan, down 13.52% compared with the same period last year. The ending inventory was 503 million yuan, up 2.2% compared with the same period last year. The company's assets impairment loss was 151 million yuan, of which the loss of bad debts was -629 yuan, the loss of inventory loss was 64 million 10 thousand yuan, and the loss of goodwill was 93 million 200 thousand yuan.

In the first half of 2019, the company's revenue was 810 million yuan, down 47.27% compared with the same period last year, ending inventory was 596 million yuan, an increase of 18.49% over the same period last year. Even so, in the first half of 2019, the company only made a loss of -599 million yuan in its inventory price. The figure was only about 1/1000, which was obviously insufficient compared with the 2018 annual report.

What is even more frightening is that the operation of the famous bird brand seems to have fallen into a vicious circle. In the past 2015-2018 years, the company's revenues were 1 billion 969 million yuan, 2 billion 279 million yuan, 3 billion 252 million yuan and 2 billion 812 million yuan, respectively. The sales expenses of the company were 203 million yuan, 203 million yuan, 385 million yuan and 697 million yuan in the same period. In this four year, the company's income increased by 41.23%, and the increase in sales expenses was 41.23%, far beyond the income growth.

Looking at the composition of these sales costs, investors seem to have more reasons to worry. In the 2014-2018 years, the advertising fees of the expensive birds were 84 million 60 thousand yuan, 93 million 900 thousand yuan, 79 million 200 thousand yuan, 66 million 340 thousand yuan and 31 million 920 thousand yuan respectively, and the brand promotion fees were 60 million 740 thousand yuan, 50 million 970 thousand yuan, 1 million 760 thousand yuan, 6 million 90 thousand yuan and 2 million 40 thousand yuan respectively.

Since 2015, the advertising expenses and brand promotion fees of the expensive birds have dropped dramatically.

In the sales cost structure of 2018, the first time increased the promotional fee of 13 million 460 thousand yuan, the sales rebate of 122 million yuan, and the repurchase fee of 128 million yuan, and the scale of these three fees far exceeded the advertising fees and brand promotion fees.

It can be seen that in 2018, the way of creating a brand has changed from original advertising to sales promotion, sales rebate and so on. Price war is doomed to be unable to last long.

From the financial data, the noble bird has not achieved the desired result. On the basis of increasing promotional fees, sales rebates and channel buyback fees, the company achieved revenue of 2 billion 812 million yuan in 2018, down 13.52% compared to the same period last year, and net profit of -6.86 billion yuan, down 536.01% from the same period last year. In the first three quarters of 2019, the company's revenue was 1 billion 169 million yuan, down 49.2% compared to the same period last year. Net profit was -1.66 billion yuan, down 1134% compared with the same period last year.

The decline in revenue, the increase in inventories, the cost of sales far beyond the revenue growth, and the large-scale emergence of promotional fees, sales rebates and channel buybacks, signals that the brand of the bird has already been in trouble.

Cross domain acquisitions frequently fail.

Since the beginning of 2016, the popular birds began to frequent acquisitions, but the field of company involvement seems to have completely deviated from the main business. Frequent acquisitions also made the company's goodwill increase. Its goodwill increased from zero at the end of 2015 to 574 million yuan at the end of 2016. Throughout the company's multiple acquisitions, the effect is not satisfactory.

In June 2016, the precious bird invested 383 million yuan to buy Jay's 50.01% stake and increased its capital. Jay is a professional retailer of sports products, selling internationally famous brand sports products and developing sports products through offline retail channels. The authorized brands are Nike, ADI, UA, Vance, CONVERSE, New Balance, Lining, etc. the products cover all kinds of sportswear, shoes and hats, accessories, sports equipment, etc., while Jay's business is mainly direct retail business, and also includes a part of distribution business, and its revenue comes mainly from the retail of its terminal stores. Three years after the purchase of the noble bird, Jay did not complete the performance pledge. At the end of 2018, the price of the fortune 50.01% stake of the noble bird was transferred at a price of 300 million yuan. In the 2018 annual report, the company disclosed that the transaction resulted in an investment deficit of 112 million yuan in the 2018 year.

Then, in July 2016, the company invested 100 million yuan to increase capital for Shenzhen Xingyou Technology Co., Ltd. (hereinafter referred to as "Xingyou technology"). After the completion of the capital increase, the company held a 45% stake in Xingyou technology. Xing you technology is a game company. Its signed star sports hand tours include products such as best lineup, street ball Union, Basketball Stars, Pele:Soccer Legend and so on. But after less than half a year's acquisition, in December 2016, the company transferred 45% stake in Xing you technology with RMB 100 million yuan.

After that, in August 2016, the 383 million yuan purchase of the expensive bird made the main idea that the sports brand business provided the electronic business operation service and charged the service fee mode to make a profit of 51% of the famous shoe database. In 2017, it also invested in the remaining 49% of the shoe stock. The shoe store entered the electricity supplier field in 2008, and it was the first batch of online retailers in China. The company's business now mainly includes two parts, one is self marketing through the e-commerce platform, the two is to provide Brand Company generation service. Three years later, the shoe store also failed to complete its performance pledge. The bird made 93 million 200 thousand yuan in its 2018 earnings report.

In addition, in March 2017, the "noble bird" also planned to buy 100% stake in Wellcome fitness for 2 billion 700 million yuan. The main business of Wellcome fitness business was fitness clubs. The fitness clubs included fitness, regimental gymnastics, yoga and private education. As of December 31, 2016, 82 of the officially opened clubs of Wellcome fitness and its subsidiary companies had entered the pre-sale stage of 11 clubs, totaling 93, but they were finally terminated by important terms such as payment, consideration and payment.

Looking at these acquisitions, not only did they fail, they also showed that the direction of the company's business had been adjusted and expanded to other areas on the basis of the original sports brand's operation.

Imperceptibly, the birds have opened up diversified development. In the 2015-2018 year, the agency revenue was zero, 32 million 810 thousand yuan, 145 million yuan, and 182 million yuan respectively. The income of sports brokers was zero yuan, 19 million 130 thousand yuan, 38 million 370 thousand yuan and 40 million 140 thousand yuan respectively, while the other business income of the same period was 710 thousand yuan, 8 million 370 thousand yuan, 22 million 40 thousand yuan and 45 million 120 thousand yuan respectively. These constant attempts will only make it difficult for the main business of the birds to get into trouble, and the future of the listed companies is worrying.

Debt risk continues to rise

When frequent acquisitions and brands are in trouble, the size of the debt is rising. At the end of 2018, the company's total liabilities amounted to 3 billion 223 million yuan, while the end of 2015 was only 2 billion 443 million yuan. At the same time, the company's asset liability ratio increased year by year, and at the end of 2016-2018 years, it was 60.62%, 65.36% and 67.81% respectively. In 2019, corporate debt continued to rise, with a total liabilities of 3 billion 342 million yuan at the end of the three quarter and a further rise in asset liability ratio to 68.42%.

In recent four years, the money of expensive birds has been decreasing year by year. In the 2016-2018 and three quarter of 2019, the company's Monetary Fund was 1 billion 392 million yuan, 747 million yuan, 148 million yuan and 15 million 290 thousand yuan, while the short-term loans of the company were 1 billion 202 million yuan, 1 billion 232 million yuan, 699 million yuan and 1 billion 177 million yuan in the same period.

In November 6, 2019, the guaranty 100 million was overdue and 1 billion 150 million bonds expired during the year. At the end of the three quarter of 2019, the company's Monetary Fund was only 15 million 290 thousand yuan, while short-term borrowing was as high as 1 billion 177 million yuan. Obviously, the company has lost its ability to repay.

At the same time, the pledge ratio of the controlling shareholder has reached 100%. Since August 2014, the shares held by the company's controlling shareholder, the noble bird group, have been continuously pledged. As at the end of 2018, the shares held by controlling shareholders have all been pledged, accounting for 76.22% of the total share capital of the company. By August 3, 2019, the price of the precious bird has fallen below the level of the performance guarantee contract set by the relevant agencies. The shares held by the group have been raged after the two auction, and the actual controller of the listed company may change at any time.

At the same time, when the acquisition fails frequently and the brand is in trouble, the company's capital chain seems to be under greater pressure.

For the problems mentioned in the article, the securities weekly magazine tried to contact the birds by mail, but the letter was automatically returned.