Textile And Garment Industry: Annual Impact Trial Of Epidemic Situation: From The Annual Report Of Hong Kong Stock Market

Brand clothing: sale by discount, Q1 retail down 30%-40%, Q2 expected impact is still there. This week 1-2 zero data revealed that clothing, shoes and hats and knitwear retail sales fell 31% year-on-year, showing an unexpected cliff fall, consistent with the disclosure of Hong Kong stock companies this week.

Take XTEP international as an example: in the field of sports subdivision and superimposed three years of release of reform results, XTEP's annual growth in retail sales has been over 20% for the whole 19 years, and the retail sales growth of more than 20% has been maintained for 20 years before the Spring Festival sales season in January. However, since February, the sales have dropped by 80%/40% from February to March, and the discount rate has decreased from 7-7.5 to 5.5-6.5. Channel inventory rose from 4-4.5 months to 5-5.5 months. As the absolute value of sales in January was the highest in the first quarter, it declined significantly in 2 and March, but on the whole, the company expects retail sales to decline by 25%-30% in the first quarter. At the same time, from the point of view of agent support, the company adopts measures such as allowing agents to exchange goods (Q1 goods for Q3 goods, and reducing Q3 production), discount subsidies for 51 or 618 promotion, and temporarily extending the total agency account period for 1 months, which will bring certain pressure to subsequent quarterly revenue and profit performance.

From the men's wear leading China, the company's retail sales in 2020 still increased, and in February, it fell by 90%. In March, it also dropped by 7-8. Therefore, the company expects Q1 retail sales to fall by 40% or more, and it will be able to recover 5-6 sales in April, which is more affected than XTEP. We think it is related to the smaller proportion of the electricity supplier in the sales (the proportion of XTEP's business report accounts for 20%+, and the number of units is Q1).

XTEP and Li Lang are the two leading representatives of the industry. Their fundamental changes are representative: in March, although most of Brand Company's 8 shops have already started business, but the passenger flow is still slowly recovering, it is difficult to recover the level of sales in the same period of 19 years before May. At the same time, taking into account that most enterprises will adopt a way to increase the return rate of Q1 products, allow Q3 products to exchange products and reduce the production of Q3 products, reduce the pressure of dealers and their own stocks, it is expected that the brand clothing reports will be negatively affected by the epidemic in the three quarter of 19 years ago. However, due to the low base of 19Q4's warm winter plus Spring Festival, 20Q4 is expected to achieve a relatively good growth. As a result, our overall judgement of the 20 year retail demand for clothing domestic demand is: the first quarter fell 30%, the two quarter fell 15%, the three quarter was flat, and the fourth quarter had a certain growth.

Manufacturing side: the spread of global epidemic, the impact of export demand will be gradually reflected in Q2. The manufacturing side was mainly affected by the delayed production of domestic products before March. From the point of view of exports, exports of textiles and clothing totaled 29 billion 800 million US dollars in 1-2 months, down 20% from the same period last year. After March, with the outbreak of the global fermentation, the overseas demand market was faced with: 1) the large number of international events including the Tokyo Olympic Games were postponed. 2) most brands represented by Nike announced the temporary closure of retail outlets in the world's key epidemic areas, and 3) the overseas electricity suppliers developed less than the domestic market. It is expected that the majority of overseas apparel retail outlets will have a Q2 bearing capacity of no less than the domestic Q1 level. China's exports of textile and clothing are mostly in the epidemic area, so it is expected that in the 3-6 month, the total export will also face a 30% decline crisis. Exports will account for more than 30% of the total exports in 3-6, plus 20% in 1-2 months. Even if exports began to recover in July, the annual export of textile and clothing is expected to drop more than 15%. However, the situation affected by enterprises will vary according to customer structure and product category.

Investment logic: in the long run, we will continue to layout white horse stocks and focus on the new economy in the short term. Continuation of our report last week in the special report on "consumer goods leading in the market"?

1, in the long run, the implicit return rate of China's consumer goods has increased significantly compared to 3-6 months ago. During this period, the Shenzhen stock index and the growth enterprise market rose by 10%+/20%+ respectively, in other words, the attractiveness of consumer products has increased significantly.

2, however, whether from domestic or international demand, it is difficult to be optimistic in the next half year. Under the circumstance of unstable overseas epidemic, the market is expected to remain in a volatile environment. If the cycle of return allowed by investors is long enough, we can consider the use of recent fluctuations in the allocation of consumption leaders at the opposite level. Continue to recommend Anta sports, Shenzhou International, Lining, Tao Bo, Bosideng, Tianhong textile and other leading companies.

In the short term, the theme of direct seeding business has ignited the enthusiasm of the market for the new economy. In the current economic environment, this is indeed a rare field with sustainable growth. We will also continue to tap opportunities in the new retail industry chain with the live business as a breakthrough, and welcome new economic targets represented by Andre fashion.

Risk warning: the slowdown in macroeconomic growth has led to a weakening of terminal consumption and the fluctuation of raw material prices.