How Are You Doing With The Reduction Of Local Sports Brands After Being Hit Hard By The Epidemic

Originally, as the "sports year", 2020 was regarded by many sports brands as a new engine to continue strong performance. However, according to the statistics of "super sports events" in 2020, the "super sports events" have been cancelled since the end of March.

"As the founder of Anta, the world's third largest sportswear company by market value, Ding Shizhong refused to let the epidemic affect sales. In early February, he assigned 30000 employees a new task: selling Anta products to his wechat contacts. This strategy has worked well. In the first quarter of this year, revenue fell by less than 25% year-on-year, while adidas' sales in China fell 58% in the same period. " At the end of June, the economist wrote in a report on Anta.

In mid July, half a month after the above report, Anta, as the leader of local sports brands, took the lead in releasing the latest operating performance and profit warning in the second quarter and the first half of 2020. According to the announcement, if the loss of the joint venture company is not accounted for according to the comprehensive benchmark, the company expects that the net profit attributable to shareholders of the company will decline by no more than 25% year on year in the first half of 2020. If the share of losses of the joint venture company is taken into account, the profit attributable to shareholders will be reduced by no more than 35%.

Although Anta has only disclosed the performance forecast for the first half of the year, many analysts said in an interview with reporters that under the general decline in revenue in the first quarter, combined with the current situation, the performance of most local sports brands in the first half of 2020 may be a foregone conclusion. When will the "haze" be followed by "strong brand growth"?

(screenshot of official website)

Hit hard by the epidemic

Originally, as the "sports year", 2020 was regarded by many sports brands as a new engine to continue strong performance. According to the financial report, the performance of local sports brands in 2019 is generally good.

In mid March, the 2019 annual report disclosed by TEB International showed that its revenue and net profit increased by double-digit in this year, and the former broke through the 8 billion yuan mark.

The annual profit of Anta increased to 3340 million yuan to 3340 million yuan in 2019, which was a year-on-year increase of 1.39 billion yuan.

The same is true for 361 degrees. In 2019, although its operating income increased by 8.6% to RMB 5.63 billion, its net profit increased by 42.4% to 430 million yuan, the highest growth rate in nearly five years.

However, under the influence of the epidemic situation, the "new year of sports" has changed its course. According to the reporter's incomplete statistics, more than 40 major international sports events have been postponed or cancelled from the beginning of 2020 to the end of March.

The sudden change of painting style is also the performance of many sports brands. According to the first quarter operating conditions announced by Li Ning, Tebu, 361 degrees and other enterprises, the drop in revenue has become a common phenomenon.

Taking Li Ning, whose net profit increased by 110% in 2019, as an example, by the end of March 2020, its offline channels (including retail and wholesale) decreased by 20% - 30%. The retail sales volume of children's clothing also decreased by 30% - 30% compared with the same period of last year, with a decrease of 30% - 30% compared with the same period of last year.

In the view of Zhang Qing, founder and President of Beijing key road sports consulting company, the overall performance of large consumer industries in the first half of the year has been greatly impacted, as is the case with sports brands. On the one hand, the offline channel is the main source of sports brand revenue. However, after the outbreak of the epidemic, offline stores were closed for a long time. In addition, the cancellation of major sports events made the marketing plan of sports brand events fail, brand exposure and flow dividend decreased sharply, which eventually led to the decline of sports goods terminal demand.

"On the other hand, with the gradual alleviation of the epidemic situation in China, the Chinese market has been regarded as a lifesaver's Straw by international sports brands with the same performance pressure, and they have reduced their prices and promoted their sales in succession. This universal price discount also poses great pressure on local sports brands." Zhang added further.

The reporter noted that after the outbreak of the epidemic, in order to further alleviate the increasingly serious inventory pressure, local sports brands have also continued to attract customers with discounts. If you look at the flagship stores of tmall such as 361 degree and special step, more than half of the products participate in the discount activities, and the advertising words of "300 minus 120" and "discount up to 6 fold" can be seen everywhere.

Although this is an immediate result, profits will be further eroded. On July 13, Credit Suisse downgraded Li Ning's target rating from "outperforming the market" to "neutral". In its research report, it pointed out that the online clothing price of Li Ning had dropped significantly after the public health event, and the average price had dropped from 351 yuan in the last week of January to 232 yuan in the first week of June, a decrease of 34%. Sales are expected to drop by 8.7% in the first half of this year. Although it agrees with the company's forecast of brand recovery and long-term profit growth, it still sees performance resistance due to large discounts in the short term.

Li Ning is not alone. When explaining the reasons for the decline in performance in the performance forecast, Anta also mentioned that during the reporting period, the gross profit margin of products had decreased. "Anta brand has conducted sales return and inventory repurchase for products in the first quarter of 2020, and the gross margin of subsequent resale of such products is relatively low. In addition, the FILA brand also increased the retail discount due to the promotion clearance activities.

Can the second half be better

"At present, de stocking through discount is a sales promotion method that local sports brands have to carry out. In this respect, the importance of online channels has been highlighted. " CIC insightful Consulting Director Jiang Xiaoxiao told reporters that at present, live delivery with goods has become a driving force for many brands to make breakthroughs in online sales.

The "record" of CEO Xu Zhihua's live show with goods is still on the peak sports public account. As the first CEO of a Chinese sports brand to start live broadcasting with goods, Xu Zhihua launched his first live show of tmall at 11:30 p.m. on April 24. According to the "Jiebao", 5000 pairs of brand-new state pole 2.0 with a price of 569 yuan were sold in just 27 minutes after the broadcast, with 67000 people watching online at the highest time, and the sales volume exceeded 5 million yuan in one hour of live broadcast.

There is also no idle Anta. In mid April, Anta's new hydrogen running shoes 2.0 and air windbreaker entered Li Jiaqi's studio. According to the data disclosed by the company, the number of online viewers reached more than 4 million. The sales of Anta hydrogen running shoes line 2.0 rose to the second in the industry last month, and the tmall index reached 6727 on the same day.

"Since the outbreak of the epidemic, Anta has started an accelerated running mode on the road of digital transformation, frequently realizing the super matching of channel and content, crowd and commodity in marketing, and continuously launching highly competitive new scientific and technological products with consumer orientation. Intuitively, Anta's e-commerce business is showing an increasingly rapid development trend. " On the afternoon of July 16, when asked about the relevant layout of online channels, Anta said in a material provided to reporters.

According to the relevant data provided by the company, during the "618" period, the total transaction volume was 1.43 billion yuan, with a year-on-year increase of 78%, setting a new record. "In the second quarter, Anta and FILA flow have obvious recovery compared with the first quarter, and the second half of the year may be expected to continue to improve. According to Anta's guidance on the growth of the second half of the year, Anta's flow will increase by 5% - 10%, and FILA flow will increase by 20% - 30%."

From the second quarter, as well as the overall level of domestic consumption, there are obvious signs of recovery. The orderly opening of sports venues and the resumption of gyms will promote the performance growth of domestic sports brands earlier. " Jiang Xiaoxiao said that at present, it is expected that there will be a big recovery in the third quarter, while winter sports clothing and other categories are expected to get rid of the impact of the epidemic in the fourth quarter.

"Overall, the performance of the second half of 2020 will be greatly improved compared with the first half of 2020, and it is expected to resume the positive growth of performance." Jiang Xiaoxiao further said.

However, according to Cheng Weixiong, an expert in textile and garment brand management and general manager of Shanghai Liangqi Brand Management Co., Ltd., the normalization of the epidemic situation has not fundamentally changed. For any local sports brand dominated by physical Duanmen stores, it is still very important to stabilize for a long time. "Compared with other categories, the functionality of sports products makes users feel more clearly under the impact of the epidemic. During the epidemic period, the brand with better segmentation scene of sports category will promote the performance through the way of community marketing. There are still sports categories with adverse growth, and home-based exercise has become the new normal.".