How Is The Garment Industry Under The Epidemic Situation? 31St Degree Production Capacity Is Passive And Online Attack.

The outbreak of new crown pneumonia is a challenge to the footwear industry in China, mainly because of the difficulties in supply and the decline in consumption intention.

In the aspect of production resumption, most of the listed companies in China's footwear industry are not in Hubei, and domestic production capacity has basically been resumed since February 10th. Recently, a lot of Listed Companies in the apparel footwear industry have been opened in recent years, but the epidemic has already had an impact on consumer confidence, and the negative impact of the sharp reduction of passenger flow will continue. Clothing shoe stores will still not be able to return to the same store sales in the coming months.

Besides the influence of the passenger flow at the sales side, there are several other problems facing the shoe and shoe enterprises.

(1) clothing and footwear enterprises generally lack the necessary anti epidemic materials. As a labor-intensive industry, the pressure of epidemic prevention and control is heavy after resuming work.

(2) there is a shortage of labor in the whole industry. Due to the closed regulation in many towns and townships across the country, a large number of migrant workers have not been able to return to their posts in time.

(3) because of unprecedented traffic control measures, the supply chain of upstream and downstream industry chain is not smooth, which affects the progress of industrial recovery.

(4) financial pressure is enormous due to difficulties in orders and liquidity.

However, online channels partly offset some of the negative impact of the epidemic. Unlike the SARS epidemic in 2003, the downstream structure of the retail industry has undergone tremendous changes. The electricity supplier has become a very important sales channel for clothing footwear enterprises. The proportion of electricity supplier income of most enterprises is not small. At present, the proportion of the total sales volume of the major brands is about 10%-30%, even to 40%.

The impact of this epidemic has accelerated the optimization and layout of online channels for apparel footwear industry. For example, backstage data from Anta (02020-HK) show that from the end of January to February 16th, the group received more than 450 thousand consulting services for electricity providers, exceeding the level of the same period last year.

And is it okay to follow Anta and Lining (02331-HK) and then 01361-HK?

It will take some time to recover the shoe's capacity.

In the February 20th announcement, it was estimated that the epidemic will affect the financial performance of industries and groups in the first half of 2020. "Fully believe that the health consciousness of the Chinese people will be further upgraded after the outbreak, and the sporting goods industry in China will usher in new opportunities for development. The board and management will be confident of the long-term development of the group." 360 degrees.

The announcement indicates that since the outbreak of the epidemic, the company has given relatively flexible working conditions to employees. Under the premise of ensuring efficiency, employees can adopt the mode of home office. Since February 10, 2020, the company's self-produced factories and offices have been fully restored.

According to media reports, the staff of the five mile Park in Jinjiang, Fujian, said that the plant was officially resumed in February 12th, but it is only partially resumed. This shows that the situation of restoring production is not as smooth as what it refers to, and the problem of lack of work caused by traffic control measures can not be ignored.

The production base is mainly located in Jinjiang, Fujian. There are two factories in Jiangtou and five li, which mainly produce shoes. In the first half of 2019, the two factories had 23 production lines with an annual capacity of 21 million footwear products. Its factories only produce about 20% of the demand for clothing products, and the rest are outsourced to Fujian and Guangdong's foundries.

In the first quarter of this year, it is hard to be confident that the shoe production side can not resume normal production capacity.

There are two core brands, footwear and clothing. In the first half of 2019, the income of the footwear division of the company was 1 billion 415 million yuan (RMB, the same below), accounting for 43.7% of total revenue, exceeding the proportion of 41.9% of clothing.

During the reporting period, footwear is still the most powerful driving force for development. However, the problem of lack of labor caused by the outbreak of the epidemic and the poor supply and marketing of the industrial chain will bring great challenges to the footwear business of the company.

Under the line hit hard, fully enhance the online platform

Under the impact of the epidemic, the retail businesses of many shoe and shoe enterprises, including 360 degrees, are dismal. The retail outlets in other parts of the country will gradually resume operation before the end of February 2020, except for retail outlets located in Hubei province. As mentioned above, the retail industry in the apparel industry is in a difficult position due to a sharp decline in passenger traffic. It is difficult to resume operation in the next few months until the end of February.

321 degrees did not abandon online channels, but overweight online businesses. During the epidemic, 360 degrees sold the sale to the e-commerce platform, and launched the call of "full staff marketing" to increase the "WeChat Mini program" and other ways to enhance online marketing, so as to reduce the impact of the epidemic on the retail end.

In the first half of 2019, the revenue of 31st online business was 424 million yuan, accounting for 13.1% of total revenue. In recent years, the contribution of 31st to Tmall, Taobao, Jingdong and other well-known e-commerce platforms and its own websites has been keeping up. In the first half of 2018 and the first half of 2019, the sales volume of online sales of electronic commerce business increased by 85.3% and 28.5% respectively.

Thanks to the promotion of IP joint product and online shopping festival, online sales in 31st quarter increased by 60%-70% in the fourth quarter of 2019, exceeding market expectations. 360 degrees shifted the location of e-commerce channels from inventory cleaning to new product launches, and online channel structure was optimized.

In addition, due to poor performance over the past few years, the company has adopted strategies to improve product mix and explore other segments. In the middle of last year, the 31st degree plan said that in the next three years, 1000 basketball courts should be operated in a second tier city, and the most popular mass sports market will be approached through basketball into the District, and the main force of consumption will be shifted from the middle and low end market to a second tier city.

The brand has been labeled "low end product" by consumers. This is also the reason why its online business has been developing rapidly in recent years. At the beginning of this year, 31st degree official website officially released the running product line Q3 technology family series products. With the help of Q technology, elite runner and marathon resources, we continued to plough and run categories to rebuild the brand image.

Conclusion: under the epidemic situation, not only the road of March 31 degrees is blocked, but also the domestic footwear industry. As the impact of the epidemic is gradually dissipating, the capacity and structural transformation will continue.

At present, the domestic sports shoes market is highly concentrated, and the market is firmly occupied by foreign brands such as Adidas and Nike. In recent years, domestic industry giants Anta and Lining have made remarkable achievements through the transformation of fashion. The 31st degree, which is mainly dependent on footwear products, is more stuck to the original track, and it is difficult to find a breakthrough in products. Therefore, the performance growth is weak, and it is still the pursuer of the second tier industry.

The problem of low positioning of 31st degree product makes it look more like a popular brand, and there will be no good market in the current era. The first step is to solve the problem of consumption stratification. Improving the positioning of products, enhancing the efficiency of distributors and refining the channel strategy are the most important tasks in the future.