"Fans Economy" Encountered Bottlenecks, Where Do We Find The White Horse In The South Of The Yangtze River?

After announces the interim report of the 2019/20 fiscal year, the image of "white horse stock" in the south of the Commonwealth (03306) is even more dim. This can not help but reflect on the future of designer brand.

Performance growth slowed, fans economy encountered bottlenecks?

The 2020 half year financial year performance report released by Jiangnan Buyi recently showed that the total income of the company was RMB 2 billion 136 million yuan (the same below), an increase of 5.3% over the same period last year, and the profit attributable to shareholders was 430 million yuan, an increase of 12.87% over the same period last year, and the basic earnings per share were 0.84 yuan.

Historical financial data show that Jiangnan Buyi 2020 half year fiscal year sales and profits in the medium term hit a record high. The only drawback is that the company's performance growth has slowed down significantly. Revenue growth was less than 17.25% in the same period last year, and profit growth was lower than 18.14% in the same period last year.

Dragged down by the decline in growth rate, Jiangnan Buyi share price has been decreasing in recent years, and the annual decline has exceeded 20%.

It seems that the growth of business performance in Jiangnan cloth clothing has obviously slowed down, mainly for the following reasons.

According to the company's financial report, in the first half of fiscal year 2020, the sales revenue of the company still relies heavily on its members. The retail sales contributed by the members accounted for about 70% of the total retail sales. Among them, in 2019, the number of member accounts totaling more than RMB 5000 yuan was more than 210 thousand (2018: more than 180 thousand), and its retail sales reached 2 billion 500 million yuan (2018: 2 billion 170 million yuan), which contributed more than 40% lines of retail sales.

Unfortunately, the growth in the number of members of the company also showed signs of slowdown in the first half of the fiscal year. As of December 31, 2019, there were more than 3 million 900 thousand member accounts in the south of the Yangtze River, accounting for an increase of 8.3% over 3 million 600 thousand in June 30, 2019, down from 24% in the same period last year.

Affected by the slowdown in membership growth, Jiangnan Buyi company's growth in the first half of the fiscal year is 0.5% higher than that in the same store. According to the analysis of earnings reports, the slowdown of member growth may have a certain impact on the company's opening up strategy and the launch rhythm of the new brand. According to the financial report, in the first half of fiscal year, the number of brand stores in Jiangnan cloth clothing decreased from 2018 in June 30, 2019 to 1993 in December 31, 2019. Among them, the number of mature brand JNBY stores grew by 48 to 932, and the number of growth brand stores decreased by 30 to 1008, and the number of new brand stores decreased by 43 to 53.

It is noteworthy that many new brands of Jiangnan Buyi not only have a number of shops, but their profitability is also worrying.

In the first half of the fiscal year, the new brand of Jiangnan Buyi's revenue reached 49 million 255 thousand yuan, an increase of 47% over the same period, of which JNBYHOME, SAMO, REVERB and other brands grew by more than 40%.

However, the high growth rate of revenue did not bring high profits to the emerging brands. In the first half of fiscal year, the profit distribution of the company's emerging brands was 28 million 281 thousand yuan, and the loss was substantially expanded compared with the 16 million 353 thousand yuan loss in the same period last year.

　 Maintaining brand image is at that time.

To sum up, the phenomenon of slower growth in the performance of Jiangnan cloth clothing is something investors do not want to see. In the view of Zhitong finance and economics APP, to stop this unfavorable trend, we must consider how to maintain the brand image and maintain the relationship with distributors. Why do you see this?

From the perspective of the gross margin of brand power, the overall gross profit margin in the middle of the 2020 fiscal year was 62.5%, which was 1.1 percentage points higher than that of the same period last year.

The increase of gross profit margin can reflect the promotion of brand strength of the company's products. However, there is a certain gap between the gross profit margin and the historical peak period of the 2020 fiscal year.

The reason is that the company has continued to open in recent years, and the number of franchising stores has increased from 1049 in June 30, 2017 to 1380 in December 31, 2019. Interesting, from a long period of view, the opening up of the franchise generally depressed the gross profit margin of the cloth in the south of the Yangtze River. But in the short term, the franchisee has become the main factor to boost the company's revenue and gross margin growth.

According to the financial report, in the middle of 2020 fiscal year, the distributor stores in the Jiangnan cloth clothing line realized gross profit of 566 million yuan, accounting for 42.3% of total revenue, up 0.9 percentage points compared with the same period last year, and the gross profit margin of distributors in the line was 9.8% higher than that of the self run shop 2.1%. The gross margin of the distribution shop reached 56%, a 3.7 percentage point increase.

Zhitong finance and economics APP noted that during the recent public health incident, Jiangnan cloth made an important business adjustment, that is, in the early February, a letter to the group dealer's partner said that, in view of the epidemic form, for the spring 2020 new products, the 2020 spring products return rate of its brand including JNBY, CROQUIS (sketch), less, jnbybyJNBY and POMMEDETERRE (Peng MA) will be returned. Adjusted to 100% ("2020 spring special return policy"), all dealers were asked to return some products in advance.

In view of this, the mainstream view of the market is that in order to avoid the backlog of products in the channel and relieve the pressure of dealers' funds, the southern part of the cloth industry has to prevent dealers from discounting sales promotions and damage brand power.

Children's wear in 2020

Back to the performance itself, how did the 2020 Jiangnan cloth dress break?

From the point of view of brand development, the 2020 Jiangnan cloth clothing may not develop new brands on a large scale, and the answer to "breaking the board" may be found on growth brands. Zhitong finance and economics APP noticed that Jiangnan cloth clothing designer JNBY by JNBY is currently the third largest clothing brand. In the 2020 fiscal year, JNBY by JNBY achieved a revenue of 330 million yuan, an increase of 15.7% over the same period last year, ranking first in the top four brands of the company.

It has been noted that from the middle of fiscal 2016 to the middle of 2020 fiscal year, the revenue growth rate of JNBY by JNBY in the south of the Yangtze River has reached 33%.

According to Euromonitor forecast, the scale of children's wear industry in China is expected to maintain high growth. In the 2019-2023 years, the average annual compound growth rate of the industry will reach 12.5%, higher than that of men's clothing (3.8%), women's wear (4.2%) and sportswear scale (10.3%). In addition, the market share of the top 5 enterprises in China's children's wear market is only about 10%, far below the concentration of nearly 30% in the US and Japan. Against this background, Jiangnan Buyi children's clothing brand is expected to continue to maintain high growth and become a brand that leverages the company's performance to maintain sound growth.

All in all, I hope that Jiangnan cloth will get rid of the slowdown in performance growth as soon as possible, and rebuild the image of "white horse" as soon as possible, so as to create more returns for investors.